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Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $ 5 6 , 0 0 0 2 4 0 ,

Revenues generated by a new fad product are forecast as follows:
Year Revenues
1 $ 56,000
240,000
330,000
420,000
Thereafter 0
Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.
Required:
What is the initial investment in the product? Remember working capital.
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 40%, 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?

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