Company A is considering a project of investing in a production line with a total initial investment of USD 500,000. It is expected that when this line is put into operation, there will be 10,000 products per year produced and sold each year. The selling price of each product is expected to be 50USD in the first year, then increasing by 10% per year. The production cost of 1 product unit in the first year is 25 USD, then the production cost increases every year by 5%.

1) As a credit officer, please prepare a report to determine the net cash flow of the project?

2) Can the above project accept a loan? Explain?

Know that: - Estimated timespan of the production line is 5 years. - The Company applies the straight-line depreciation method - The company's income tax rate is 25%. - The opportunity cost of equity is 26% - Owner's equity in the project is 40% of the total investment. The company expects to lend the rest of the investment with an interest rate of 12%/year