2. Capital Budgeting (3 Questions @ 15 points each 45 points total

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Investment Corp. (IC) is considering foreign direct investment in a facility overseas. The investment will require $1,000,000 up front, and the require rate of return is 6%. The facility should produce for five years. The following data concerns the relevant cash flows:

1)	Revenues are projected to be $450,000 for the first two years, and $200,000 for the last three years.
2)	Fixed costs of operating the facility will be $10,000 per year paid at the beginning of the year.
3)	Variable costs are expected to be 30% of gross revenues.
4)	Maintenance costs are expected to be $1,000 for the first year, $3,000 for years 2, 3, and 4, and
		$7,000 for year 5.
5)	IC uses straight-line depreciation, and the facility is estimated to have a salvage value of $200,000.
6)	The flat tax rate is 25%.

Required: Use the Present Value table (or a financial calculator) to calculate the following:
18)	Net Present Value (NPV)
19)	Payback Period
20)	Book Rate of (ROI)