(Calculating NPV) Doublemeat Palace is considering a new plant for a temporary customer, and its finance department has determined the following characteristics. The company owns much of the plant and equipment to be used for the product. This equipment was originally purchased for $90,000; however, if the project is not undertaken, this equipment will be sold for $35,000 after taxes; in addition, if the project is not accepted, the plant used for the project could be sold for $90,000 after taxesthe plant originally cost $40,000. The rest of the equipment will need to be purchased at a cost of $150,000. This new equipment will be depreciated by the straightline method over the project's 3-year life, after which it will have zero salvage value. No change in net operating working capital would be required, and management expects revenues resulting from this new project to be $244,000 per year for 3 years, while increased operating expenses, excluding depreciation, are expected to be $86,000 per year over the project's 3-year life. The average tax rate is 25 percent and the marginal tax rate is 31 percent. The required rate of return for this project is 14 percent.

a. What is the initial outlay associated with this project?

b. What are the annual after-tax cash flows associated with this project for years 1 and 2 (note that the cash flows for years 1 and 2 are equal)?

c. What is the terminal cash flow in year 3 (what is the annual after-tax cash flow in year 3 plus any additional cash flows associated with the termination of the project)?

d. What is the project's NPV given a required rate of return of 13 percent?