Future Energy Lab is considering launching a new sports energy gel product. The estimated project life is three years. The project requires an upfront investment of $900,000, which will depreciate over three years on a straight-line basis with no salvage value. Additionally, the following information has been estimated:

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

The unit price of the energy gel is $4.0 per pouch.

The cost of inputs (water and additives) is $2.08 per pouch.

The company will need to maintain working capital to support production and sales. The working capital balance requirements are $0, $100,000, and $200,000, respectively, at the beginning of year 1, at the end of year 1, and at the end of year 2. All remaining working capital balance will then be recovered at the end of year 3.

The company faces a tax rate of 30% and generates taxable income of at least $200,000 each year from other divisions.

Answer questions a) below. (Lecture notes pp.7-12)

b) Determine EBIT, net income, and cash flows and find the NPV of the project, assuming the projects cost of capital is 10%.