"Sarnia Chemical Corporation is considering investing in a new composite material. R&D engineers are investigating exotic metal-ceramic and ceramic-ceramic composites to develop materials that will withstand high temperatures, such as those to be encountered in the next generation of jet fighter engines. The company expects a three-year R&D period before these new materials can be applied to commercial products. The following financial information is presented for management review: R&D cost. $5 million over a three-year period. Annual R&D expenditure of $0.5 million in year 1, $2.5 million in year 2, and $2 million in year 3. For tax purposes, these R&D expenditures will be expensed rather than amortized. Capital investment. $5 million at the beginning of year 4. This investment consists of $2 million in a building and $3 million in plant equipment. The company already owns a piece of land as the building site. Capital cost allowance. The building's CCA rate is 4% and the plant equipment has a CCA rate of 30%. Project life. 10 years after a three-year R&D period. Salvage value. 10% of the initial capital investment for the equipment and 50% for the building (at the end of the project life). Total sales. $43 million (at the end of year 4), with an annual sales growth rate of 10% per year (compound growth) during the next five years (year 5 through year 9) and -10% (negative compound growth) per year for the remaining project life. Out-of-pocket expenditures. 82% of annual sales. Working capital. 10% of annual sales (considered as an investment at the beginning of each production year and investments fully recovered at the end of the project life). Marginal tax rate. 40%. a) Determine the net after-tax cash flows over the project life. b) Determine the IRR for this investment. c) Determine the equivalent annual worth for the investment at MARR = 16%