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Brenklin Hospitality Company wants to expand its business by acquiring new equipment. This investment will require a replacement with the old equipment. The new equipment is currently selling for $425,000. The new investment requires an additional outlay of $75,000 to cover shipping and handling costs. The old equipment is fully depreciated and the new equipment will be depreciated straight-line to a zero value over ten economic life of a project.

Additionally, this capital budgeting project is expected to increase sales revenue by $60,000, increase operating costs by $8,000 for the first year. There is no estimated salvage value on the new equipment for the first year. For the second year, 10.00% increase in sales revenue and operating cost but there is no change in depreciation from the first year figures. Also, there is $30,000 estimated salvage on the new equipment at the end of its economic life. There is no expected change in net working capital for both of the years after the project is undertaken. What are the net cash flows for the first and second year for this capital investment (assume that applied tax bracket is 40.00%)?

Group of answer choices

a. $51,800 for the first year and $70,880 for the second year

b. $43,700 for the first year and $72,320 for the second year

c. $51,200 for the first year and $69,320 for the second year

d. $48,200 for the first year and $69,320 for the second year

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