Acme Toy Company is considering the purchase of a machine for their production line.

Information on the purchase is shown below. show working in xl

Purchase Information:

1. Cost of machine is $ 3000000

2. Expected increase in EBIT is $ 700000

3. Training costs for new machine $ 225000

4. Increase in inventory for new parts $ 375000

5. Salvage value of machine $ 300000

6. Expected life of machine - 10 years, use straight line depreciation.

7. Tax Rate - 35% 35%

8. Required Rate of Return 12%

a. Calculate the initial outlay associated with the project.

b. What is the annual after tax cash flows for years 1-9?

c. What is the terminal cash flow in year 10?

d. Should the machine be purchased? (Do an NPV)