QUESTION 1:

**Please do not use excel to solve**

QUESTION 2:

**Please do not use excel to solve**

parts inventory). The project would have no effect on revenues, but it should save the firm $61,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. b. What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent. In Year 1$ In Year 2$ In Year 3$ c. If the WACC is 10%, should the spectrometer be purchased? nachine. a. How should the $5,000 spent last year be handled? I. Only the tax effect of the research expenses should be included in the analysis. II. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay. III. Last year's expenditure is considered as an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. IV. Last year's expenditure is considered as a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. V. The cost of research is an incremental cash flow and should be included in the analysis. b. What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. ! c. What are the project's annual cash flows during Years 1, 2, and 3? Round your answer to the nearest cent. Do not round your intermediate calculations. Year 1 Year 2$ Year 3q d. Should the machine be purchased