8) Your company is considering a new line of product with the following projections for the project:

First year's sales $200,000

Annual growth rate in sales is 5%

Annual cost of goods sold 40% of sales

Annual general and administrative expense $4,000

Cost of equipment in year 0 is $330,000, installed.

Equipment will be depreciated to zero using S/L for 4 years

Project economic life is only 5 years. Equipment expected to have a market value of $60,000 at the end of 5 years.

Tax rate 35%.

This project will require an increase in net working capital, in the initial period of $20,000 which is expected to be recovered at the terminal year.

Proforma statement to calculate Project's cash flow year 0-5 and answer the following questions:

a. Equipment annual depreciation is: ________________

b. Revenues (sales) in year 3 is: ___________________

c. First year operating cash flow (OCF) is: ____________

d. After tax salvage from sale of the asset at end of 5 years is ________________

e. Assuming 10% cost of capital, NPV for the project is: ___________________