Question 1

2.5.a - project net income: Your company is considering a new investment of $24,000. The investment will be depreciated in a straight-line manner over a four-year project life. Financial projections from associated operations are as follows:

	yr1	yr2	yr3	yr4
Sales Revenue	$12,500	$13,000	$13,500	$10,500
Operating Costs	2,700	2,800	2,900	2,100

Working capital for years 0, 1, 2, 3 is expected to be $300, $650, $1,050, $1,350, respectively. All working capital is recovered at the end of the project. Your company faces a tax rate of 34 percent.

What is the annual net income from this investment for years 1, 2, 3, and 4?