Intel is considering making a new investment of $ 1000 in a new chip producing facility and has come with the following estimated revenues are 1250 , operating expenses 800, depreciation $250 per year. The project will end after four years, the marginal tax rate is 40% and the cost of capital for Intel is 0.08.

Estimate the initial investment.

Answer for part 1

Estimate the annual after-tax cash flow to the firm to Intel on this investment. (You have to do it only once, since the cash flows are the same every year)

Answer for part 2

Estimate the net present value of this project.

Answer for part 3

Now assume that this project will require Intel to maintain working capital at 20% of revenues occurring at the beginning of each year and the working capital being recovered at the end. Estimate the new initial investment.

Answer for part 4

Estimate the net present value of the project with the working capital.