A firm is considering a new project. The project is expected to have Year 1 revenues of $6,400, and revenue will climb by 25% in year one, with the growth rate declining by 1% each year thereafter (to 24% in year 2, 23% in year 3, etc.). The operating costs are 25% of each years revenue throughout the forecast period.

The firm acquired a plot of land seven years ago. It paid $3,200 for the land, originally intending to turn it into a parking lot. The firm will sell the land for $3,375 after taxes to make way for this project; the land would have been worth $9,200 after taxes at the end of this project if the firm had kept it. Last year, the firm paid consultants $967 to build a marketing plan to support this new projects rollout.

The firm will also invest $1,600 in net working capital at time zero. Each yet during the forecast period, the firm total net working capital will be 25% of the following years revenue. Assume all working capital is recovered at the end of the project.

The firm will invest $12,000 in machinery before this project begins; they are classified as 5-year assets according to MACRS and will be depreciated to zero. These assets will be sold at the end of the project for $425.

The firms cost of capital is 16%. Its corporate tax rate is 38%. It's a 5 year project.

1) determine the firms free cash flow through the life of the project.

2) calculate the projects NPV and IRR