ABC Company is studying a project that would have a five year life and

require a $1,600,000 investment in the equipment. At the end of five years, the

project would terminate and the equipment would have no value left over.

The project would provide net income each year as follows:

Sales 3,200,000

Less COGS 300,000

Gross Margin 2,900,000

Less: Operating Expenses

Advertising &other fixed expense 1,200,000

Salary Expense 1,400,000

Amortization Expense 100,000

Total Expenses 2,700,000

Net Income 200,000

The company's discount rate is 18%

1) compute the net annual cash inflow from the project

2) compute the net present value of the project. Is it acceptable?