AbbVie Company is considering to purchase a new control device. The cost of the new device is $58,300, and the machine will be depreciated straight-line over a two-year period to zero salvage value.

The firm's tax rate is 40%. At the outset of the project, AbbVie Company anticipates investing $5,100 in raw materials inventory.

Management has decided to terminate the project in two years and sells the device at an anticipated used price of $9,720.

AbbVie Company has forecast sales and costs over the two-year time horizon:

Year 1 2 Sales $150,000 $120,000 Cost of Goods 40,000 30,000 Other Costs 7,500 4,900

AbbVie Company expects that it will have to add about $5,940 per year to its net working capital in year 1 (i.e., net working capital investment in year 1 is $5,940), and add nothing in year 2.

Question 1: What is the initial investment, i.e., start-up cost (C₀)?

A $63,400

B $61,870

C $58,300

D $53,200

Question 2: What is the net operating cash flow at the end of year 1, i.e. C₁?

A. $73,050

B. $67,220

C. $84,930

D. $73,160

Question 3: what is the net operating cash flow at the end of year 2, i.e. C₂?

A. $68,552

B. $79,590

C. $79,592

D. $63,342