AllRight Corporation (the company) plans to launch a new line of products (the project). In order to execute its plan, the company needs to purchase a new piece of equipment for $500,000. The equipment has a useful life of four (4) years after which it can be sold for $25,000. The project also has a life of four (4) years. In addition, the company expects to make an investment of $50,000 in Net Working Capital to operate the equipment, which will be recovered at the end of the project. As a result of this investment, the company expects to increase its revenues by $600,000 per year. Incremental Variable Operating expenses are estimated at 30% of incremental revenues per year. The project will also require a fixed expense of $30,000 per year.

The new machine is much bigger in size. AllRight intends to install the new machine in an existing facility in a different location of the city that they purchased for $500,000 two years ago. AllRight is currently leasing that space out to a third party for $25,000 per year.

The company has a tax rate of 35%, and its cost of capital or discount rate is 12%. The CCA rate (depreciation rate) for the equipment is 25% (use straight-line depreciation).

Based on the information above, answer the following using the table given below (round your answers to the nearest dollar):

a) Calculate the Cash Flows after tax. (3 marks)

b) Calculate the Free Cash Flows. (3 marks)

c) Calculate the Net Present Value (NPV) of the investment in the equipment. (3 marks)

d) Should AllRight accept or reject the project? (1 mark)

Year	0	1	2	3	4
Revenue
Variable Cost
Gross profit
Net income before tax
Tax @ 30%
Net income after tax
Add: Depreciation
Cash flow after tax
Investment
Working capital
Free Cash Flow
NPV @ 12%