6. For the following project, compute the free cash flows in each year. What is the net present value? Do you undertake the project? 1) Machine costs $400,000, and is depreciated $100,000 every year using the straight line method over four years 2) The machine will generate sales of $300,000 in year 1, and then sales will increase by 30,000 each year until year 5 (that is, sales are $330,000 in year 2, $360,000 in year 3, etc). 3) The production costs are 1/3 of sales. 4) The advertising expense are $60,000 in year 1, and $30,000 in years 2 and 3 5) The project will erode $50,000 of the sales of the firm's other products (per year). However, if the project does not go through, it is estimated that a competitor will introduce a similar product one year later, causing the erosion of $120,000 of the firm other's products in years 2, 3, 4 and 5. 6) The tax rate is 40%. 7) The net working capital requirement is 20% of next year's sales. 8) At the end of year 5, the machine can be sold for $120,000. 9) The discount rate is 12%

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