For Questions 6, use the information about Warrior-Ade provided below.

Sport Science International is considering launching a new sports drink Warrior-Ade. The estimated project life is three years due to the fierce competition in the sports drink market. The project requires an upfront investment of $500,000. The salvage value of the new investment is $50,000 at the end of the third year. The company uses the straight-line depreciation. Additionally, the company has estimated the following information:

The estimated annual demand for the new sports drink is 300,000 bottles, 200,000 bottles, and 150,000 bottles, respectively, for the three years of the product life.

The unit price of the new sports drink is $2.0 per bottle.

The cost of inputs (water and additives) is $1.04 per bottle.

The company will need to maintain working capital to support the production and sales. The working capital requirements are zero, $50,000, and $100,000, respectively, at the beginning of year 1, at the end of year 1, and at the end of year 2. The working capital will then be recovered at the end of year 3.

The company expects the equipment will be sold at a price of $150,000 at the end of year 3.

The company faces a marginal tax rate of 30%.

Question 6 [5 pts]

Using the information about Warrior-Ade provided above, determine unlevered cash flows for each year (complete the worksheet below). Calculate the NPV of the project assuming the cost of capital for the project is 10%.

Answer (show the steps/calculation toward your results):

Complete the worksheet below:

Year	0	1	2	3
Unlevered income = EBIT(1 T)
Depreciation add back
Capex
Liquidation cash flow, aftertax
Working capital change
Unlevered Cash Flows