Problem 2 (covering chapter 6): The Company A is thinking of a new project that is expected to have following income statement projections for next 3 years (year 1, 2 and 3 is same). In year 0 the project requires an initial investment of $90,000, which will be depreciated using straight line depreciation to $0 over 3 years. Assume working capital changes of 0. Assume after-tax salvage value of $65,000 Tax rate is 34%. Sales (50,000 units at $4.00/unit) Variable Costs ($2.50/unit) Gross profit Fixed costs Depreciation ($90,000/3) EBIT Taxes (34%) Net Income $200,000 125,000 $ 75,000 12,000 30,000 $ 33,000 11,220 $21,780 a) What would be the Net Cash Flow (NCF) for each year (year 0, 1, 2, and 3)? (hint: calculate Operating Cash Flow (OCF) first, it will be same for year 1, 2 and 3) b) what is the NPV of these Net Cash Flows at discount rate of 8%? Should you accept this project