A project would require a $15,000,000 capital investment and will be depreciated (straight-line to zero) over its 3 year life. They know that they will be able to salvage $3,500,000 for the equipment at that time.

Incremental sales are expected to be $12,750,000 annually for the 3 year period with costs (excluding depreciation) of 30% of sales. The company would also have to commit initial working capital to the project of $4,325,000. The company has a 35% tax rate, and requires a 10% rate of return for projects of this risk level.

Project Cash flow (cash flow from assets for year 1 is:

a. $5,800,600

b. $4,756,384

c. $7,800,231

d. $6,800,470

e. $7,551,250