Aunt Sally's Sauces Inc., is considering expansion into a new line of all natural, cholesterol free, sodium free, fat free, low calorie tomato sauces. Sally has paid $50,000 for a marketing study which indicates that the new product line would have sales of $650,000 per year for each of the next six years. Manufacturing plant and equipment would cost $500,000 and will be depreciated according to ACRS as a five year asset. The fixed assets will have no market value at the end of six years. Annual fixed costs are projected at $80,000 and variable costs are projected at 60% of sales. Net working capital requirements are $75,000 for the six year life of the project; the outlay for working capital will be recovered at the end of six years. Aunt Sally's tax rate is 34% and the firm requires a 16% return.

Show all work and formulas

A. Compute the net present value for the new product line.

B. Compute the internal rate of return for the new product line.

C. Use the tax shield approach to compute the operating cash flow for years 1 through 6.