Borealis is company that produces custom-ordered inks and printing of corporate posters. It has received a contract from a new marketing client that requires 20,000 posters of customized brochures each year for the next 5 years, after which the client will create brochures and media options. As this is a specialized project, Borealis will have to purchase a high-definition printer which costs $600,000, and which is estimated to have a re-sale value of $85,000 (before taxes) after 5 years of use. As Borealis has (and will continue to have) a number of existing printers (Class 8 Assets depreciated at a CCA rate of 20%), the asset pool of printers will remain open. This project will also require an initial cash outlay of $20,000 in net-working capital that will be recovered at the end of the project. The posters will cost $32.50 for print & delivery, and can be billed to the client at $55/poster. The companys cost of capital for its projects is 9% with typically a 1% premium for custom-orders. If the tax rate is 40%, should Borealis accept the contract?

A) What are the total cash flows at the beginning of the project (i.e. Year 0)?

B) What is the operating cash flow (after-tax and excluding tax shield) for each of the years 1 4

C) What is the total cash flow (not including the CCATS) at the end of the project (i.e. Year 5)?

D) What is the PVCCATS?

E) What is the NPV of the project?

F) What is the minimum number of posters to be sold in order for Borealis to break even?

G) Assuming the client guarantees 20,000 posters will be purchased, but wants to re-negotiate the price per poster, what is the minimum price Borealis should charge before the project becomes untenable?