Benford Inc. is planning to open a new sporting goods store in a suburban mall. Benford will lease the needed space in the mall. Equipment and fixtures for the store will cost $250,000 and be depreciated over a 5-year period on a straight-line basis to $0. The new store will require Benford to increase its net working capital by $200,000 at time 0. First-year sales are expected to be $1.6 million and to increase at an annual rate of 8 percent over the expected 10-year life of the store. Operating expenses (including lease payments and excluding depreciation) are projected to be $800,000 during the first year and increase at a 5 percent annual rate. The salvage value of the stores equipment and fixtures is anticipated to be $10,000 at the end of 10 years. Benfords marginal tax rate is 40 percent. Round your answers to the nearest dollar.

1. Compute the net investment required for Benford.

   $

2. Compute the annual net cash flows for the 10-year projected life of the store.

   Year	NCF
   1	$
   2	$
   3	$
   4	$
   5	$
   6	$
   7	$
   8	$
   9	$
   10	$

3. Compute the annual net cash flows assuming equipment and fixtures are depreciated using the 7-year asset class under MACRS. Use Table 9A-3 to answer the question.

   Year	NCF
   1	$
   2	$
   3	$
   4	$
   5	$
   6	$
   7	$
   8	$
   9	$
   10	$

TABLE 943 Depreciation Rates for MACRS Property Other than Real Property Recovery Year 3 4 0 0 - RINRINAS285 11 12 13 14 15 16 17 18 19 20 21 3-Year 33.33% 44.45 14.81 7.41 5-Year 20.00% 32.00 19.20 11.52 11.52 5.76 7-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 10-Year 10.00% 18.00 14.40 11.52 9.22 7.37 6.55 6.55 6.56 6.55 3.28 15-Year 5.00% 9.50 855 7.70 6.93 623 5.90 5.90 5.91 5.90 591 5.90 5.91 5.90 5.91 2.95 20-Year 3750% 7.219 6.677 6.177 5713 5285 4.888 4522 4462 4461 4462 4461 4462 4461 4462 4.461 4462 4461 4462 4461 2.231