1. Shark Bait Corporation is thinking of buying some new shark attractant manufacturing equipment that will last 3 years. Shark Bait thinks it can sell $308,000 of shark attractant each year if it buys the new equipment. It costs $207,000 each year to make the attractant. The new manufacturing equipment will cost $98,000 with delivery costs of $1,000. The equipment will be depreciated to zero over the 3-year life of the project. The project will require an additional net working capital of $18,000 at the time the equipment is purchased. The tax rate is 30%. At the end of the project, Shark Bait plans to sell the equipment for scrap for an estimated $1,000.

a. Calculate the Net Investment Asset Cost + Delivery and Installation = Total installed cost - Proceeds from sale of old asset + Tax on sale of bold asset + Net working capital = Net Investment b. Calculate the Net Cash Flow Year 0 Year 1 Year 2 Year 3 A Rev per Costs - ADep. = - Taxes = A OEAT +ADep - ANWC + After Tax Salvage = NCF