A project is expected to create cash flows of $22,500 each year for three years. The initi alcost of the fi xed assets (FCI) is $50,000. These assets will be worthless at the end of the project. An additional $3,000 of net working capital (WC) will be required at the beginning of the project, which can be recovered at the end of year 3. What is the projects net present value (NPV) if the discount factor is 10%? Show details of your work.

1) The depreciation method used in the analysis is:

a) straight line

b) sum of years digits

c) double declining balance

d) MACRS over 7 years

2) The assumed taxation rate used in the analysis is:

a) 15%

b) 25%

c) 38%

d) cannot be determined

3) The salvage value of the plant is:

a) NONE

b) $5 million

c) $15 million

d) $25 million

4) The total of after-tax cash flows in all years $ (-10-25-20-35+14.77+25.93+...+77.70) million is called the:

a) net present value

b) cumulative cash position

c) cumulative cash ratio

d) rate of return on investment

TNumbers in () represent negative values. Land cost=10. 'Plant started up at end of year 3 . 'Working capital =15