IBC, Inc. is considering the purchase of a $320,000 computer that has an economic life of 5 years. The computer will be depreciated according to 5-year MACRS schedule (20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%). The market value of the computer will be $60,000 in 5 years. The use of computer will save annual costs of $120,000 for the next five years. For simplicity, these cost savings are assumed to occur at the end of these years. As a result of this project, the net working capital will increase by $60,000 immediately, and it will be recovered at the end of year 5. The firms tax rate is 40% and its cost of capital is 12%. | What is the initial investment requirement (t=0)? What is the operating cash for one, two, three and four and five years? How much tax is the firm expected to pay when the asset is sold for $60,000 in year 5?

What is the project's NPV?