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 $250,000 at time 0. First-year sales are expected to be $1.2 million and to increase at an annual rate of 6 percent over the expected 10-year life of the store. Operating expenses (including lease payments and excluding depreciation) are projected to be $500,000 during the first year and increase at a 3 percent annual rate. The salvage value of the stores equipment and fixtures is anticipated to be $7,000 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	$

ATABLE 94.3 Depreciation Rates for MACRS Property Other than Real Property* Recovery Year 3-Year 5-Year 7-Year 1 33.33% 20.00% 14.29% 2 44.45 32.00 24.49 3 14.81 19.20 17.49 4 7.41 11.52 1249 5 11.52 8.93 6 5.76 8.92 7 8.93 8 4.46 9 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 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 10 11 12 13 14 15 16 17 18 19 20 21 Assumes that the half year convention applies - 20-Year 3.750% 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2231