Assumptions Company is looking at a 3 year project see assumptions below. First Year Sales $1,500,000 Sales grow 10% per year over next two years Initial Investment $2,150,000 Required Return 20% Year MARCS 3 Yr Table Tax Rate 35% 1 0.3333 15% 2. 0.4445 $175,000 3 0.1481 Variable Costs (% of Sales) Fixed Costs per year Net Working Capital Salvage Value (Market) 4 0.0741 $168,000 $125,000 1) Derive the firms Pro Forma Income Statement. Calculate the Cash Flows From Assets. 2) Calculate the NPV and IRR for the investment. SHOULD THE FIRM MAKE THE INVESTMENT? Pro Forma Income Statement Years 1 2 3 Sales (10% growth YR 2 & 3) Variable Costs Gross Profit Fixed Costs Depreciation (MACRS Table) EBIT Taxes Net Income Cash Flows Year 0 1 2 3 Operating Cash Flows Changes in NWC Net Capital Spending Net Salvage Cash Flow Cash Flows Year 0 1 2 3 Cash Flow From Assets Net Present Value IRR Project is a "Go" OR "No Go" A