2. If McCormick & Company decides to purchase the new factory in Largo, they need to consider relevent after-tax cash flow. McCormick & Company estimated their potential first-year sales revenue at $600,000, expenses at $225,000, and depreciation expense at $150,000. McCormick's marginal tax rate is 40 percent (21 percent federal and 19 percent state combined). What is first-year relative cash flow?

3. The estimated relevent annual expected cash flows (C1) associated with the puchase of the new factory in Largo are as follows: Year C1 PV(C1) 1 ? ? 2 $291,000 $202,083 3 $191,000 $110,532 4 $306,000 $147,569 5 $424,000 $170,396 In year 3, the estimated relevent annual expected cash flows represents funds used to pay operating expenses for subsequent years. All estimated relevent annual expected cash flows include a risk premium of 13 percent, which has already been applied to the cash flows above. Solve for cash flow for Year 1 based on your answer in Question 2. Then, solve for present value (PV) for Year 1. What is the total of present value for all five years? Should the factory be purchased? Why or why not?