Question $1.(25$ points$)$

ABC Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line would be set up in unused space in ABC $\text{'}$ main plant. The machinery's invoice price would be approximately $$180,000$; another $$10,000$ in shipping and insurance charges would be required; and it would cost an additional $$10,000$ to install the equipment. The machinery has an economic life of $3$ vears, and ABC has obtained a tax ruling which places the equipment in the MACRS $3-$year class. The machinery is expected to have a salvage value of $$10,000$ after $3$ years of use.

The new line would generate additional sales of $3,000$ units per year for three years at a cost of $$100$ per unit in the first year, excluding depreciation. Each unit can be sold for $$200$ in the first year. The sales price and cost are expected to increase by $5\%$ per year due to inflation. Further, to handle the new line, the firm's net operating working capital$($t$)$ would have to increase by an amount equal to $10\%$ of sales revenues $(t1).$ The firm's tax rate is $40$ percent, and its overall weighted average cost of capital is $10$ percent.

$\backslash$table$[[$Year$,$Depreciation Rate$],[1,33\%$