QUESTION 3: Energy East Corporation is considering an expansion of their production facility. The financial data is as follows: Investment: $2,200,000 o 30% debt equity ratio. Loan ($660,000) borrowed at 4% interest. Project life: 6 years Salvage value: $150,000 o Year 6 dollars Depreciation method: 5-year MACRS Income tax rate: 25% Annual Revenue: $1,000,000 o Year 0 dollars Annual Expense: $400,000 Year 0 dollars o Does NOT include depreciation o Does NOT include interest Market interest rate (i): 12% . . . If the general inflation rate (affects revenues, expenses, salvage value) during the next 6 years is expected to be 6% annually: a. Develop the income statement for the project. (12 points] b. Develop the cash flow statement for the project. [3 points] (Hint: Don't forget the Financing Activities) c. Determine the PW of the project. Is the project economically viable and why? [4 + 1 points] (Hint: Cash flows in Actual dollars, given market interest rate. Therefore, no need to convert to constant dollars before calculating PW)