PLEASE ALL VALUES SHOULD BE SHOWN WITH RESPECTIVE FORMULARS, NO JUMPING OF STEPS.

Your firm owns a Volkswagen dealership, and you are considering entering into a 5-year agreement to also sell Audi A4s. The cars would cost $26,000, and you believe that you can sell 50 Audis per year at an average price of $30,000. You would have to hire 2 new sales people that you would pay $30,000 per year each plus 5% of the revenue they each generate. Audi would require that you invest $200,000 (depreciable straight line over 5 years) in Audi-related signs, equipment, and furniture to place in your dealership. You would also be required to invest in 20 cars to keep in inventory over the life of the project. After 5 years, you can recover any investment in working capital, and the unneeded equipment would have a market value of $50,000. Your firm requires a 12% return on all new investments, and the tax rate is 40%. Should you accept the project? Show your work and justify your answer.

Show how to determine the income statements for years 1 through 5 of the project

Determine the Free Cash Flows for years 0 through 5

Calculate the NPV.