Caltex Australia Limited is considering expanding their market presence on the Gold Coast by constructing two net petrol stations. Caltex Australia Limited anticipates this expansion will provide a lucrative competitive edge against rival firms. The new petrol stations will effectively cost $3.8 million, plus $70,000 for installation costs.The two petrol stations are to be treated as one project, with the petrol stations expected to be fully depreciated over a useful life of 10 years.

The new petrol stations will require Caltex Australia Limited to increase their net working capital, at the start of the project, by $60,000. They will also need to increase their net working capital by an additional $4,000 per year over the project's 10 year life. The expansion project is expected to increase the firm's annual revenue from $3.5 million to $4.2 million per year. Annual operating costs are also expected to increase from $400,000 to $480,000 per year.

At the end of this 10 year project, Caltex Australia Limited anticipate they will be able to dispose of the two petrol stations for $750,000 total. The firm's marginal tax rate is 40%.

a) Calculate the project's net investment as of today.

b) Calculate the project's annual after-tax net operating cash flows for years 1 - 10.

c) Calculate the project's after-tax termination cash flow in year 10.

d) If the management of Caltex Australia Limited wishes to only invest in projects with returns of 12% or greater, should they invest in this project? why or why not?