4b and 4c

.4 .24 tAnalysia: Use the following information to answer x73 questions 3 and 4, below: A project requires an initial investment (i.e., at t.) in equipment of $200,000. At t-3, the project will end and the company plans to sell the equipment for $5,000. The equipment can be depreciated according to the three year schedule, which allows depreciation of 33.33% at t-1, 44.45% at t-2, 14.81% at t-3, and 7.41% at t=4. Depreciation will be based solely on the initial cost of the equipment (i.e., when calculating depreciation, ignore any salvage vaiue) . This project is expected to produce sales revenue of $300,000 the first year i.e., at t l): this revenue will increase by 10% per year over the next two years (i.e., t#2 and t.3). Manufacturing costs are estimated to be 60% of sales. A key marketing study was completed last year: the cost of this study was $50,000. This project requires working capital. Specifically, at each point in time, the working capital required is equal to 208 of the predicted revenue the next year. So, for example, working capital required at t=0 is 20% of $300,000, or $60,000. Working capital will be fully recovered at t-3 The corporate tax rate is 35%. The company's tax situation is such that it can make use of al1 applicable tax shields and deductions. The opportunity cost of capital for this project is 10% 3. Calculate the cash flows generated by the project for to, t-l, t-2, t-3, and t-4 4. A. Calculate the Net Present Value of the project B. Keeping all other assumptions the same, what must t-l Revenue be in order for this project to have a zero NPV? C. Keeping all other assumptions the same, what must t-1 Revenue be in order for this project to have zero Profit After Tax at t=1? what is the project's NPV now? cenaitivity Analysis: Use the following information to