Calculate Cash Flows for Project A from the following data: PROJECT A Please calculate final cash flows for Years 1 through 4. Assume the project will conclude at the end of year 4 and NOWC will be reduced at that time to 0. INPUTS: PRICE: $2.00 per unit at t=0 WACC: 10.0% annually VC RATE: 62.0% of revenues Tax-RATE: 25% marginal Price/Unit Inflation 0% annually Depreciation Method 3-yr MACRS* Equipment Cost $200,000 Installation Costs $40,000 Increase in inventory $25,000 (yr 0 only) Increase in Accounts payable $5,000 (yr 0 only) Salvage Value $15,000 end of year 4 or $70,000 end of year 3 Return of NWC Occurs in Yr 4 Likely method to calculate annual differential cash flows: END OF YEAR: 0 1 2 3 4 . UNIT SALES (THOUSANDS) 100,000 110,000 100,000 100,000 PRICE/UNIT ______ ______ ______ ______ ______ TOTAL REVENUES OPERATING COSTS, EXCLUDING DEPRECIATION DEPRECIATION ______ ______ ______ ______ ______ TOTAL COSTS ______ ______ ______ ______ ______ EARNINGS BEFORE TAXES TAXES ______ ______ ______ ______ ______ NET INCOME DEPRECIATION ______ ______ ______ ______ ______ NET OPERATING CASH FLOW *3-year MACRS use 33.33%, 44.45%, 14.81% and 7,41% for the four years

Capital Budgeting Project 4/5/22 Page 2 of 2 What is the NPV of Project A lasting 4 years? Accept or reject and why?