Fresnel is planning a 5-year time horizon for this project. At the end of year 5, the company will liquidate the assets

from the project. All assets will have been fully depreciated. A list of facts and assumptions, including sales forecasts

for the life of the project, are given in the tables below

Design Costs, Already Incurred to Date

$150,000

Initial Cost of Equipment

$675,000

Annual Depreciation on Equipment

$135,000

After-Tax Salvage Value of Equipment Year 5

$65,000

Annual Selling and Adminstrative Expenses

$95,000

Production Costs (% of Sales)

35%

Working Capital Investment (% of Sales)

25%

Effective Tax Rate (% of Taxable Income)

21%

Required Return (%)

12%

Sales Projections

Year One

$250,000

Year Two

$650,000

Year Three

$850,000

Year Four

$800,000

Year Five

$450,000

a) Using the information provided, create simple income statements for each year of the project. Calculate the annual Operating Income (EBIT) and Net Income.
								b) Create an analysis of the Working Capital needs and changes for each year (see the table at the top of page 263 of the textbook for an example).
c) Determine the Free Cash Flow for each year of the project.
d) Calculate the project's NPV, BCR, and IRR.
e) Based on your analysis, very briefly explain whether this project should be pursued and why.