Alice's firm is considering launching a new product. The product will sell for $130 per unit to start. When competition catches up after three years, however, Alice anticipates that the price will drop to $120. This project will require $30,000 in niet working capital at the beginning. Subsequently, total networking capital at the end of each year will be about 10 percent of total sales for that year. The variable cost per unit is $70, and total fixed cost is $30,000 per year. It will cost about $1,000,000 to buy the equipment necessary to begin production. This investment is primarily in industrial equipment, which qualities as seven-year MACRS property. The relevant tax rate is 34 percent Unit Sales Property Class 3.000 Year Three Five-Year Seven-Your 5,000 33335 20.00% 14.29% 6,000 2 24 0,500 1740 8,000 5,000 4,000 3.000 Year 1 2 1 3 4 3 4 4445 1481 741 3200 19.20 1152 11.50 5.70 12.02 6 . 8.92 200 246 B Based on this information Calculate cash flow from asset for year 8. $100,313 $142,364 -$33,900 $179,111 $92,084 Question 2(10 points) A new project has an initial cash investment (Cash flow from asset) of -$1,030,000. Cash flow from asset for years 1 - 7 are $120,000, $186,000, $210,000, $265,000, $185,000, $167,000, and $146,000. This project has similar risk as the firms current operations. Assuming a WACC of 9%, what is the NPV of this project 52,717.38 411,993.22 0-252.915.59 -113,783,62