Bayside Industries Inc. is evaluating an expansion project to establish its presence in a key market for its products. You have collected the following data on the proposed project:

• The project requires $25 million in initial capital investment, and will have an economic life of 5 years. The investment will be straight-line depreciated down to a book value of zero at the end of 5 years. The investment is expected to be salvaged for $5 million at the end of 5 years.
• The projected sales are $20 million per year from year 1 through year 5, variable costs are 50% of annual sales, and fixed costs are $3 million per year.
• The corporate tax rate is 20 percent.
• The weighted average cost of capital applicable to the proposed project is 8%
• Ignore investment in net working capital.

(a) Please compute the cash flow from assets for each year. [12 points] {cash flow from assets is the same as free cash flow}

(b) What is the NPV of the project? [5 points]

(c) If the projected annual sales decrease by 5% to $19 million per year, how much would the projects NPV change? (8 points)