Compute the new investment (Year 0), the net cash flow for each of the five years of the project (Year 1 to Year 5). And What is the NPV of the project and should the project be accepted or not?

Question 3 ( 25% of total exam) Events Expert Corp. is planning to acquire new equipment for a cost of $38,000. Management has already conducted and paid $15,000 for a marketing survey while delivery and installation costs are expected to be $9,000 and $7,400, respectively. Financing costs are $3,000 per year. The economic life of the investment is 5 years and the new equipment will depreciate straight-line to a zero value over 5 years. The management team expects this new equipment at the end of 5 years at a price of $4,000. Events Expert Corp expects the acquisition to increase sales by $6,000 annually while cash operating costs are expected to increase by $3,200 annually. This investment will allow the replacement of old equipment which can be sold for $5,000. It had a book value of $10,000 four years ago, but it has now been fully depreciated. The marginal tax rate is 25% and the expected rate of return is 12%. Additional net working capital of $8,000 will be needed immediately. When the project is terminated in 5 years, there no longer will be a need for this incremental working capital