Revenues generated by a new product are shown below

Year Revenue

1 54,000

2 30,000

3 20,000

4 10,000

Thereafter 0

Expenses are expected to be 50% 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 $50,000 in plant and equipment.

1. What is the initial investment into the product? Remember Working Capital

Initial Investment : ____________

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 30%, what are the project cash flows in each year?

Year Cashflow

1 _________

2 ________

3 _________

4 __________

If the opportunity cost of capital is 12%, what is project NPV? is it negative?

NPV: _____________

What is project IRR?

IRR _______%