1. Williamston Widgets is considering introducing a new product known as the Super Widget 2000. A study of the global widget market has provided the following estimate about the project: Annual sales of 100,000 widgets, variable costs of 80% of sales, fixed costs of 5,000,000, sales price of $1,000. The equipment needed to produce this new product will cost $25,000,000, and will be depreciated to a book value of 0 over its estimated 5 year useful life. The tax rate is 21%. What is the annual amount of the Operating Cash Flow expected to be generated by this project?

2. A company is evaluating a capital budgeting project, and has come up with 5 scenarios. The CFO of the company really likes the project, and even though the base case NPV is negative, he has instructed the finance department to do a scenario analysis with 4 more scenarios. The NPV of all 5 turns out to be negative. What is the proper action for the CFO to take?