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1. Burton, a manufacturer of snowboards, is consideringreplacing an existing piece of equipment with a more sophisticatedmachine. The following information is given.The proposed machine will cost $120,000 and have installationcosts of $20,000. It will be depreciated using a 3 year MACRSrecovery schedule. It can be sold for $60,000 after three years ofuse (before tax; at the end of year 3).The existing machine was purchased two years ago for $95,000(including installation). It is being depreciated using a 3 yearMACRS recovery schedule. It can be sold today for $20,000. It canbe used for three more years, but after three more years it willhave no market value.The earnings before taxes and depreciation (EBITDA) are asfollows: oNew machine: Year 1: 133,000, Year 2: 96,000, Year 3:127,000 oExisting machine: Year 1: 84,000, Year 2: 70,000, Year 3:74,000Burton pays 40 percent taxes on ordinary income and capitalgains, and uses a WACC of 14%.The maximum payback period allowed is 3 years.They expect a large increase in sales so their Net WorkingCapital will increase by $20,000 when they buy the machine and itwill be recovered at the end of the project life.a.Calculate the initial investment required for thisproject.b.Determine the incremental after-tax operating cash flowsc.Find the terminal cash flow for the projectd.Find the Discounted Payback period, NPV, IRR, and MIRR.e.Should the new machine be purchased? Why or why not?