A project requires an initial investment in equipment and machinery of $10 million. The equipment is expected to have a 5-year lifetime with no salvage value and will be depreciated on a straight-line basis. The project is expected to generate revenues of $5.1 million each year for the 5 years and have operating expenses (not including depreciation) amounting to 1/3 of revenues. Assume the tax rate is 40%, and the cost of capital is 10%. What is the present value of cash inflows from year 1 to year 5? What percentage of this present value is attributed to the tax benefits accruing from depreciation?

$12.89m; 24%

$10.77m; 28%

$3.18m; 95%

$7.73m; 39%

$10.77m; 24%