(New project analysis?) The Chung Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered will result in an increase in earnings before interest and taxes of $30000 per? year, it has a purchase price of $140000, and it would cost an additional ?$5000 to properly install the machine. In? addition, to properly operate the? machine, inventory must be increased by $10000.This machine has an expected life of 10 ?years, after which it will have no salvage value.? Also, assume simplified? straight-line depreciation and that this machine is being depreciated down to? zero, a 34 percent marginal tax? rate, and a required rate of return of 16 percent.
a. What is the initial outlay associated with this? project?
b. What are the annual? after-tax cash flows associated with this project for years 1 through? 9?
c. What is the terminal cash flow in year 10? (what is the annual? after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the? project)?
d. Should this machine be? purchased?