Capital Expenditure @ t=0 (Depreciable basis): $525,000 Inventories will rise by 93,000. Payables will rise by $17,000. MACRS 3-year class property (depreciation for years 1-4:33%, 45%, 15%, 7%) Economic life: 3 years (You will have remaining depreciable basis to deal with at the end of year 3) Inflation-590 Salvage value: $91,000 (You do not need apply inflation this number even though the CF is in t-3) Annual sales revenues: $480,000 (quoted in t=0 dollars, revenue starts in F1. In other words, revenue in year 1- $480,000 * (1i) Operating costs: 55% of sales Tax rate = 35%, WACC = 1 1 % . . . 1. Calculate the Acquisition Stage (aka t-0) OCF. 2. Calculate the Acquisition Stage (aka t-0) FCF 3. Calculate OCF in Year 1 4. Calculate OCF in Year 2 5. Calculate OCF in Year 3. 6. Calculate Year 3 FCF 7. Calculate Project NPV