Marie's Fashions is considering a project that will require $28,000 increase in net working capital and $87,000 in new equipment. The project is expected to produce annual sales in each of the 5 years of $150,000, based on 3,000 units sold at $50 price per dress. Cash purchase cost is $20 per dress for the 3,000 dresses. The project has a 5-year life. For the new equipment, the company uses straight-line depreciation (no MACRS depreciation) to a zero book value over the life of the project. The tax rate is 30 percent.

What is the operating cash flow for this project?

The required rate of return for Maries Fashions is 8%. Calculate the NPV and advise Marie on

whether she should invest in the new project.

Marie is concerned that the sale price of $50 assumed by her financial analyst is too optimistic over the 5 year period. Use sensitivity analysis on the sale price to advise Marie on whether her operating cash flow estimates are reasonable given her concerns.