Novartis International is considering purchasing a computer to streamline its raw chemical/material inventory management in order to raise drug production rates. The financial data is as follows:

• Investment: $100,000
  • 60% debt-equity ratio. Loan ($60,000) borrowed at 6% interest.
• Project life: 4 years
• Salvage value: $5,000
  • Year 0 dollars
• Depreciation method: 3-year MACRS
• Income tax rate: 30%
• Annual Revenue: $180,000
  • Year 0 dollars
• Annual Expense: $90,000
  • Year 0 dollars
  • Does NOT include depreciation
  • Does NOT include interest
• Market interest rate ( i ): 7%

If the general inflation rate during the next 6 years is expected to be 2% annually:

1. Develop the income statement for the project.
2. Develop the cash flow statement for the project.
3. Determine the PW of the project. Is the project economically viable? Why?