Firm X has the opportunity to invest $315,000 in a new venture. The projected cash flows from the venture are as follows. Use Appendix A and Appendix B.

	Year 0				Year 1				Year 2				Year 3
Initial investment	$	(315,000	)
Revenues					$	54,400			$	54,400			$	54,400
Expenses						(32,640	)			(8,160	)			(8,160	)
Return of investment														315,000
Before-tax net cash flow		(315,000	)		$	21,760			$	46,240			$	361,240

Firm X uses an 8 percent discount rate, and its marginal tax rate over the life of the venture will be 25 percent.

Required:

1. a-1. Complete the below table to calculate NPV. Assume that the revenues are taxable income, and the expenses are deductible.
2. a-2. Should firm X make the investment?
3. b-1. Complete the below table to calculate NPV. Assume that the revenues are taxable income, but the expenses are nondeductible.
4. b-2. Should firm X make the investment?

	Year 0	Year 1	Year 2	Year 3
Before-tax cash flow
Tax cost
Net cash flow
Discount factor 8%
Present value
NPV