Q4 A.

	Year 0	Years 1-12
Investment	- $5,400,000
Sales		$ 16,000,000
Variable costs		13,000,000
Fixed costs		2,000,000
Depreciation		450,000
Pre-tax profit (1 2 3 4)		550,000
Taxes (at 40%)		220,000
Profit after tax		330,000
Cash flow from operations (4 + 7)		780,000
Net cash flow	-$5,400,000	$ 780,000

Recalculate cash flow as shown from above table if variable costs are 83 percent of sales. Confirm that NPV will be - $788,000.