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Blue Creek Industrial Inc. is considering updating itsproduction process. The managers are considering replacing amachine which it purchased four years ago with an installed cost of$620,000. There are 2 years of depreciation remaining using theMACRS rates given below. The new machine, a BIOVAT 3000, will cost$900,000 and will require an additional $29,000 for delivery andinstallation. This new unit will also require training costs ofapproximately $11,000. The MACRS rates are 20%, 32%, 19%, 12%, 11%,and 6% for years 1 through 6 respectively, and the marginal taxrate is 34%. The old machine is expected to be sold forapproximately $320,000 today or $38,000 ten years from now. If BCI purchases the new equipment, annual revenues are expected toincrease by about $47,000 per year, however, the expenses areexpected to decrease from $42,000 with the old equipment to $27,000with the new machine in the first year. Beyond that, the company’sexpenses are expected to be an additional $3,000 less per year.Since the new machine is expected to be more efficient, netoperating working capital (mainly due to required inventory) isexpected to fall by $4,000 at the outset of the project and remainat that new level through the duration of the project.a) (8 points) Calculate the year 0 cash flow which would be usedfor capital budgeting purposes.b) (8 points) Calculate the year 1 net cash flow which would beused for capital budgeting purposes.