Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $ 40,000 2 30,000 3 20,000 4 10,000

Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $53,000 in plant and equipment.

Required:

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firms tax rate is 20%, what are the project cash flows in each year?

If the opportunity cost of capital is 12%

what is project NPV? What is project IRR?