Keene, Inc., is considering a new four-year expansion project that requires an initial fixed asset investment of $1.4 million. The project is estimated to generate $2,200,000 in annual sales, with costs of $1,300,000. The tax rate is 35%. The project requires an initial investment in net working capital of $100,000 of which 90% will be recovered at the end of the project. The fixed asset will have a market value of $300,000 at the end of the project. The discount rate for the project is 14%.

7.9 a. What is the depreciation expense each year if the company decides to depreciate the asset as a three-year asset using MACRS? b. If the company uses the MACRS, what is the OCF each year for the project? c. If the company uses the MACRS, what is the NPV of the project?