A1 Milling Machines

The low price is $ 108,000 and costs of shipping and add the other $ 12,500. The car falls into class three years of MACRS and would be sold after 3 years for $ 65,000. The applicable depreciation rates are 33, 45, 15 and 7 per cent. The machine would require an increase of $ 5500 liquid capital (inventory increased less accounts payable increased). There would have effect on income, but labor costs of pretassazione decrease by $ 44,000 a year. The marginal rate is 35 per cent and the WACC is 12 percent. In addition, the constant spent $ 5,000 last year studying the possibility of using the machine. a. How should the $ 5,000 spent last year to be treated? b. What is the net cost of the machine for entry into the capital budget purposes, namely, the flow of money to the project from year 0? c. What are the net cash flows of operation during the years 1, 2 and 3? d. What is the flow of money from year end? e. The car should be bought? Explain your answer.