4 years 9 years After consultation with industry, the following two projects are available for investment: Project A Project B CAPEX / Initial Outlay $12,000,000 $9,000,000 Project life Revenue (per year) $6,000,000 $3,500,000 Variable costs $500,000 $600,000 Operating expense $1,000,000 $800,000 Investment in Net Working Capital (Year 0) $400,000 $300,000 The company'stax rate is 30% and uses a straight-line depreciation method. There will be no 'salvage value associated with these projects at the end of their project life. The company also anticipates it will recover all of the NWC at the end of the project. The company has a required rate of return of 8% per annum. Determine the Free Cash Flows, for each year, to the firm for both projects. (7 marks) b) Identify which project you recommend the company invest. (3 marks) c) What is meant by incremental cash flows from a capital budgeting perspective? Why should only incremental cash flows be included in the project valuation process? (3 marks) d) When is it appropriate to use the firms cost of capital for assessing new projects? (2 marks) e) Discuss the concept of net working capital (NWC), and identify its use within a business