RET Inc. currently has two products, low and high priced stoves. RET Inc. has decided to sell a new line of medium$-$priced stoves. Sales revenues for the new line of stoves are estimated at $$200$ a year. Variable costs are $70\%$ of sales. The project is expected to last $10$ years. Also, non$-$variable costs are $$20$ per year. The company has spent $$10$ in research and a marketing study that determined the company will lose sales of $$30$ a year from its existing high$-$priced stoves. The production variable cost of these sales is $$20$ a year.

The plant and equipment required for producing the new line of stoves costs $$200$ and will be depreciated down to zero over $20$ years using straight$-$line depreciation. It is expected that the plant and equipment can be sold $($salvage value$)$ for $$20$ at the end of $10$ years. The new stoves will also require today an increase in net working capital of $$30$ that will be returned at the end of the project.

The tax rate is $40$ percent and the cost of capital is $10\%.$

What is the initial outlay $($IO$)$ for this project?

A $2.$ What is the annual Earnings before Interests, and

Taxes $($EBIT$)$ for this project?

A $3.$ What is the annual net operating profits after taxes

$($NOPAT$)$ for this project?

A $4.$ What is the annual incremental net cash flow

$($operating cash flow: OCF$)$ for this project?

A

$5.$ What is the remaining book value for the plant at

equipment at the end of the project?

A

$6.$ What is the cash flow due to tax on salvage value for

this project? Enter a negative # if it is a tax gain. For example, if your answer is a tax on capital gains of $$3,004\mathrm{.}80$ then enter. $-3,005$; if your answer is a tax shelter from a capital loss of $$1,000\mathrm{.}20$ then enter $1,000$

A $7.$ What is the project's cash flow for year $10$ for this project?

A$)$

$8.$ Is the Net Present Value $($NPV$)$ for this project positive