conduct a cash flow analysis to make sure that the proposed t-shirt venture generate value. The students, after careful data collection and analysis, have come up with the following assumptions for T-shirt Corp.:

1. The life of the project is expected to be 3 years. Please assume that the analysis is taking place at the end of 2021. 2022 will be the first year of operation.

2. The projected sales are: 2022 2023 2024 Number of t-shirts 1,000 2,000 3,000

3. The price of a t-shirt will be $15 in 2022 and will remain constant for the three years.

4. The cost of producing one t-shirt will be $5 in 2022 and will remain the same for three years.

5. There will be marketing expenses amounting to $2,000 per year.

6. T-shirt Corp. needs to invest in a machine that would print designs on the t-shirts. The machine costs $10,000 and will be depreciated fully using a straight line method over 10 years. At the end of 2024, the machine will be sold for $5,000.

7. The company will run the operations in a garage owned by one of the parents. The rent and utilities allocated to the garage is $200 per month. This amount would be paid regardless of how the space is being utilized.

8. The company will finance the machine with a bank loan. Interest expenses will be $300 per year.

9. In order to run the operations without any cash flow problems, the T-shirt Corp. will invest in working capital amounting to 10 percent of the following years sales.

10. T-shirt Corp. already spent $5,000 for market research in 2021.

11. Tax rate (federal plus state) is 21%. 12. The cost of capital for this project is estimated to be 10%. Please put together the cash flow projections for this project (20 points) and calculate its Payback Period, NPV and IRR (20 points).