This exercise parallels the machine purchase decision for the Mendoza Company that is discussed in the body of the chapter. Assume that Mendoza is exploring whether to enter a complementary line of business. The existing business line generates annual cash revenues of approximately $5,000,000 and cash expenses of $3,600,000, one-third of which are labor costs. The current level of investment in this existing division is $12.000.000. Sales and costs of this division are not affected by the investment decision regarding the complementary line) Mendoza estimates that incrementalnoncash networking capital of 30000 will be needed to support the new business line. No additional facilities level costs would be needed to support the new line-there is currently sufficient excess capacity. However, the new line would require additional cash expenses overhead costs) of $400.000 per year Raw materials costs associated with the new line are expected to be $1.200.000 per year, while the total labor cost is expected to double The CFO of the company estimates that new machinery costing $2.500.000 would need to be purchased. This machinery has a seven-year useful fe and an estimated salvage de value of $400.000 Fortax purposes, assume that the Mendoza Company would use the straight line method with estimated svage ou considered in the calculation Assume, further, that the weighted average cost of capital (WACC)for Mendoza is after tax) and that the combined federal and state) income tax rate is 40% Finally, assume that the new business One is expected to generate annual cash revenue of $3.500.000 Required: Determine relevant cash flows fra at each of the following three points project i on project person and project disposal pemination For purposes of this last calculation, you can usume that these is sold at the end of t h e for the salvage value used to establish the annual straight ne depreciation deductions further you can assume that at the end of the project's life Mendoza wilfully recover its initial investment in networking capital Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Determine relevant cash flow ( a rtaxat project initiation Required 2 >