Revenues generated by a new fad product are forecast as follows:

YearRevenues

1$60,000

240,000

330,000

410,000

Thereafter0

Expenses are expected to be 30% 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 $81,000 in plant and equipment.

a.What is the initial investment in the product? Remember working capital.

b.If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm's tax rate is 20%, what are the project cash flows in each year? Assume the plantand equipment are worthless at the end of 4 years.(Do not round intermediate calculations.)

year cash flow

1

2

3

4

c.If the opportunity cost of capital is 10%, what is the project's NPV?(A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

d.What is project IRR?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $40.5 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18.1 million. The firm's tax rate is 40%. What is the after-tax cash flow from the sale of the equipment?(Enter your answer in millions rounded to 1 decimal place.)

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,200 and sell its old washer for $2,500. The new washer will last for 6 years and save $1,700 a year in expenses. The opportunity cost of capital is 15%, and the firm's tax rate is 40%.

a.If the firm uses straight-line depreciation to an assumed salvage value of zero over a 6-year life, what is the annual operating cash flow of the project in years 0 to 6? The new washer will in fact have zero salvage value after 6 years, and the old washer is fully depreciated.(Negative amount should be indicated by a minus sign.)

Annual operating cash flow in year 0

Annual operating cash flow in years 1 to 6

b.What is project NPV?(Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)