Jennifer is a project manager for Cyclone Fitness Inc. She is evaluating the feasibility of a project to build a new plant for manufacturing a new health drink. She has the following information. Sales of 800,000 bottles/year with a price of $5/bottle. Variable cost per bottle is $1.5 per bottle. Fixed costs are $500,000 per year. Project life is 5 years. Initial Investment (cash outlay) is $5,000,000. Depreciation is $1,000,000/year. Additional net working capital of $1,500,000 required. Same for all periods. The firms required return is 22%. The tax rate is 30%.

a. What is the OCF in year 1 to year 5?

b. What is the (Free) Cash Flow in year 1 to year 5?

c. What is the NPV of the project? Should Cyclone Fitness Inc. accept or reject the project?