For Option II, the initial installation of hardware and software requires $300,000. A further $100,000 marketing budget is expected at the start to promote the network. The total annual capacity available is about 11,000,000 kWh. Revenue earned is based on $0.15/kWh. A commission based on 10% of total revenue is payable to the vendor to maintain the hardware and software. It is also estimated that other operating expenses to be 30% of its projected revenue.

- Project the capacity usage over the next 5 years. Explain the basis of your projection and any assumptions made.

- Compute the annual cash flows for 5 years assuming a terminal cashflow based on 5% of initial installation cost.