Do not use Excel or Matrix

You have to show your work

Answer problems 11, and 12 based on the following.

The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls in the MACRS 3-year class. The applicable depreciation rates are 33%, 45%, 15%, and 7%. Purchase of the computer would require an increase in working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for three years and then sold for $25,000. The firm's marginal tax rate is 40%, and the project's cost of capital is 14%. (Note: The working capital investment of $2,000 will be recovered at the end of the project and added to the after-tax terminal cash flow from the sale of the equipment.)

____ 11. What is the operating cash flow in Year 2?

____ 12. What is the project's NPV?