8

The Junioer Network company s considering a new 5 -year expansion project that requires an initial fixed investment of $2.5 million. The foxed asset will be deprecizted stralght line to zeto over its five year tax life, after which time it will be worthless. The applicable tax rateis 22% Estimated annual safes for the project are $2.2mili on with annual costs of $1.15mm. The project will also require an initial investrientin NWC of $140,000. The tax shield approach is defined as: Using the tax stiele approsch, OCF for years 1 through 5 are estimated at 5 per year