Shivatsi plc is considering a new 3-year expansion project that requires an initial fixed asset investment of 2.1m. The fixed asset would be depreciated straight-line to zero over its three-year tax life after which time it will be worthless. The project is estimated to generate 2,150,000 in annual sales with costs of 1,140,000.

a.If the tax rate is 40%, what is the operating cash flow (OCF) for this project? Demonstrate OCF calculation using three different methods discussed during the lecture.

b.If the required return is 12%, what is the NPV?