Frank Einstein Co$.$ is a firm that specializes in selling Halloween decorations. It is evaluating a new

project that requires an initial investment of $$1\mathrm{.}42$ million. The asset will be depreciated to zero over its

$3-$year life. The company's analysts estimate that in the first year, the project will generate $$1\mathrm{.}09$ million

in revenues. The revenue will increase by $7\%$ per year in the following two years. The costs in the first

year will be $$475,000$ and they will increase by $5\%$ per year thereafter. The corporate tax rate is $25\%$

and the required return is $12\%.$ What is the NPV of the project?

Using the information in Question $1,$ re$-$estimate the project's NPV incorporating the following changes:

a$)$ The project also requires an investment of Net Working Capital each year as follows:

Year: $0123$

NWC: $$250,000$ $$225,000$ $$250,000$ $$0$

b$)$ The market value of the asset will be $$230,000$ at the end of the project.

c$)$ The company expects their snack sales, which are currently $$15,000,$ to be higher by $3\%.$ That is$,$ their

snack sales will be $$15,450$ every year. The after$-$tax operating margin is $10\%.$

Using the information in Questions $1$ and $2,$ re$-$estimate the project's NPV incorporating the following

changes:

a$)$ The asset will be depreciated using the $3-$year MACRS asset class.

Year: $1234$

Depr. $\%$: $33\mathrm{.}33\%44\mathrm{.}45\%14\mathrm{.}81\%7\mathrm{.}41\%$