Cathys Cats is considering launching a new toy, Sir Issac Mewton. Cathys Cats already paid $185,000 for a marketing survey to determine the viability of the new toy. You have collected the following data on the project:

• Sales are projected to be $900,000 per year from year 1 through year 4.
• The variable costs will amount to 18% of sales, and the fixed costs will be $230,000 per year
• The initial capital investment in the necessary equipment is$980,000, which will be depreciated in a straight-line manner for the four years of the project life.
• The equipment is expected to have a salvage value of $100,000 at the end of year 4.
• The corporate tax rate is 20%, and the required return on investments of this level of risk is 13%
• No additional investment in net working capital is required

A) Compute the cash flow from assets for each year. (Cash flow from assets is the same as free cash flow) [10 points]

B) What is the NPV of the project? [5 points]

C) If the projected variable costs increase to 25% of sales, how much would the projects NPV change? (5 points)