Hotel is considering adding an equipment to its facility. The equipment would cost $138,000,would be depreciated on a straight-line basis over its five-year life, and would have a zero salvagevalue. The estimated income from the equipment would be $72,000 a year with $24.000 of thatamount being variable cost. The fixed cost would be $11,600. In addition, the hotel anticipates anadditional $14,000 in revenue from its existing facilities if the equipment is added. The projectwill require $3,000 of net working capital, which is recoverable at the end of the project. Discountrate is 12 percent and tax rate is 34 percent.

a) Calculate OCF b) What is the annual cash flow? c) Calculate net present value