1. Gamble, Inc. is considering a very risky new three-year expansion project that requires an initial fixed asset investment of $906,000. The fixed asset will be depreciated straight-line to zero over its three-year life, after which time it will be worthless. The project is estimated to generate $999,000 in annual sales, with costs of $555,000. The tax rate is 21% and the required return for this project is 18%. Question 1a: Using the tax shield approach what is the OCF for this project? Question 1b: What is the NPV? Should the project be accepted? 2. Shades, Inc. has a new pair of sunglasses it is evaluating. The company expects to sell 9,200 pairs of sunglasses at a retail price of $155 each with a variable cost of $122 each. The equipment necessary for the project will cost $321,000 and will be depreciated on a straight-line basis over the 6 year life of the project. Fixed costs are $250,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $5 increase in variable costs per pair of sunglasses