Diana and Greg currently own a hat$-$making company based out of their garage, and the

two of them are thinking about expanding their business to include making and selling

custom t$-$shirts, polos, jerseys, hoodies, etc. to local schools, clubs, and businesses.

They know that they'll need to buy screen$-$printing and embroidery equipment totaling

$$190,000,$ and they'll depreciate that equipment over a tax life of $10$ years with no

salvage value. They expect annual sales to follow the table, variable costs to be $60\%$ of

sales, working capital requirements to be $10\%$ of the following year's revenue, and they

only plan on staying in business for five years. After those five years, the lease calling

for $$25,000$ in annual rent for the new shop they'll require will expire, and they'll be

able to sell their used equipment for $$50,000.$ Their tax rate is $30\%.$

YEAR

a$.$ What is the project's initial cash flow?

b$.$ What is the NPV of this endeavor if the discount rate is $10\%?$