A. III sunk cost, not included
B. Initial outlay = cost - tax savings on depreciation + increase in working capital
= 174,000 -174000*25% +6500
=$137,000
C. Year 1 =(51000)(1-25%) =$38,250
Year 2 =$38,250
Year 3 =38,250+6500 +70,000*75%
=$97,250
NPV = present value of cash inflows- present value of cash outflows
= 38250/1.12 +38250/(1.12)^2 + 97250/(1.12)^3 - 137000
=-$3134.92
Hence, should.not be purchased
Since NPV is negative
еВook You must evaluate a proposal to buy a new milling machine. The purchase price of...
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