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

Year 1: $40,000

Year 2: $30,000

Year 3: $20,000

Year 4: $10,000

Thereafter 0

Expenses are expected to be 40% 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 $45,000 in plant and equipment.

1. What is the initial investment in the product? Remember working capital.
2. The depreciation rate is 25% per year for 4 years, and the firms tax rate is 40%, what are the project cash flows in each year?
3. If the opportunity cost of capital is 12%, what is project NPV?
4. What is project IRR?