A project has a $300,000 initial capital investment cost and a three-year life. The firm depreciates the capital using a straight-line method. The project also requires an investment in net working capital of $60,000 in year zero, which will be recovered at the end of the projects life. The expected revenues are expected to be $400,000 over each of the next 3 years. Operating Expenses (not including Depreciation expense) is expected to be $310,000 each year. The corporate tax rate is 40%.

1. Show Free Cash Flows to the Firm in years 0, 1, 2, and 3.
2. Using a cost of capital = 10%, calculate the Net Present Value and IRR of the project.
3. Should the project be excepted or rejected? Explain.