is considering the purchase of new equipment. The equipment costs $350,000 and an additional $110,000 is needed to install it. The equipment will be depreciated straight line to zero over a five year life. The equipment will generate revenues of $265,000 per year and it will have annual operating cash expenses of $83,000. The equipment will be sold for $85,000 at the end of the fifth year. An inventory investment of $73,000 is required during the life of the project. The company is in the 40% tax bracket and its cost of capital is 10%.