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2. The following I/S is based on the information associated with a new project. Answer the questions. Projected Income Statements Year 2 4 Sales 9,000,000 9,000,000,000,000,000,000 Variable Cost 5.000.000 5.000, 5,000,000 5.000.000 Fixed Cost 2.500,000 2.500,000 2,500,000 2.500.000 Depreciation 700,000 700,000 700,000 700,000 EBIT 800,000 800.000 800.000 800,000 Taxes (40%) 320,000 320,000 320.000 320.000 Net income 480,000 480.000 480,000 480.000 1) We plan to invest $2,800,000 to get started. The new equipment is completely depreciated in four years, but it will be sold for $200,000 at the end of the project. Moreover, we can save $50,000 in the net working capital (NWC) at the beginning of the project. Fill out the projected cash flow table. (60 points) Projected Cash Flows 0 1 Year 2 ) 3 4 KOCE > Changes in NW 3 Capital spending -2.800,000 Total Cash Flow > 2) Figure out the net present value (NPV) of this project if the required return is 20%. Based on the NPV, do you accept or reject this project? (20 points) 3) Figure out the modified internal rate of return (MIRR) of the project if the required return is 20% (30 points)