calculate free cash flow using the NOPAT approach.

$1.$You are evaluating a project, and your task is to conclude whether the project should be accepted or rejected using the NPV criteria. The rate appropriate for discounting this project's cash flows is $12\%.$ Prepare a detailed table for estimating project cash flows and carry out NPV analysis to arrive at the conclusion. Project characteristics are as follows:

Initial investment $=$ $$2,000,000$

Project's life $6$ years

Initial investment in working capital is $$200,000.$ At the end of each year, net working capital must be adjusted so that the cumulative investment in net working capital is one$-$sixth of the

next year's projected sales. The fixed capital is depreciated at the following rates annually $($starting year $1)$: $30\%,35\%,20\%,10\%,5\%.$

Sales are expected to be $$1,200,000$ in Year $1.$ The sales are expected to grow at a $25$ percent annual rate for the next two years, and then grow at a $10$ percent annual rate for the last three years.

Fixed cash operating expenses are $$150,000$ for Years $1-3$ and $$130,000$ for Years $4-6.$

Variable cash operating expenses are $40$ percent of sales in Year $1,39$ percent of sales in Year $2,$ and $38$ percent in Years $3-6.$

The firm's tax rate is $30$ percent. As per the proposal, it is expected that the market value of the fixed asset at the time of project's completion will be $$150,000$