Q1: ABC is looking at purchasing a new machine. The new machine installed cost is $60,000 and requires minimal increase in NWC (net working capital). It will be sold at the end of year 3 for an anticipated $5,000.Use MACRS 3 yr. (Remember to add the terminal cash flow in when calculating year 3 OCF)

Anticipated cash savings prior to depreciation:Year 1$20,000,Year 2 $30,000, Year3 $20,000

Calculate the operatingcash flowsfor each year.

Q2:

Continuing withABC Mining's possible machine purchase.Note:use your cash flows obtained from previousquestions.

a. What is the NPV for the project if thecost of capital for this project onlyis estimated to be 7%?

b. What is the project IRR?

Q3:

Continuing with ABC Mining's analysis of machine purchase. Using previous information and answers..

a. What is the project payback?

b. What is the project discounted payback?

c. Justusingthe data obtained so far, shouldthey go forward with the project? yes or no