s 1: A company is considering the purchase of a new machine. The machine will cost $60,000 plus $25,000 for shipping and installation and falls under the 3-year MACRS class. Net Working Capital will rise by $6,000 initially. It is forecasted that revenues will increase by $150,000 for each of the next 4 years and the machine will then be sold (scrapped) for $5,000 at the end of the fourth year, when the project ends. Operating costs will rise by $80,000 for each of the next four years. The company is in the 40% tax bracket. Calculate the relevant incremental cash flows for this investment including initial cash outflow, operating cash flows and terminal cash flow. Question 2: Assume that previous asset expansion project in question # 1 is actually an asset replacement project. The original basis of the existing machine was $30,000 and depreciated using straight-line over five years ($6,000 per year). The machine has two years of depreciation and four years of useful life remaining. The company can sell the current machine for $10,000. The new machine will not increase revenues but it decreases operating expenses by $5,000 per year. Net Working Capital will initially rise to $10,000 from $5,000 (old). Calculate the relevant incremental cash flows for this investment including initial cash outflow, operating cash flows and terminal cash flow. Question #3 Using the cash flows calculated in question # 1 above, calculate Payback Period, Internal Rate of Return, Net Present Value and Profitability Index of the project at the required rate of return of 10 %. Should the project be undertaken undertaken