Speedracer Cycling Company is considering launching a new bicycle model, the "racer k6". The company expects to offer the k6 for 5 years, at which point it will need to launch a new model to stay competitive in the cycling market. They beleive they will sell 5400 of these bikes per year, for 5 years. They will sell for a price of $600 each. They will have variable costs of $280 each. Regardless of how many units are sold, they will have 500,000 annual fixed costs associated with the production. There will be an upfront captial expenditure of 4.2 million associated with the purchase of new equipment. The equipment will be depreciated using the bonus depreciation method. At the end of the project, the equipment will have no value. The project will not require any additional working capital investment. The companys marginal tax rate is 21%.

1. find initual up front invesmtment

2. cash flows in year 1

3. cash flows in years 2-5\

year	0	1	2	3	4	5
Sales revenue
variable costs
fixed costs
depreciation
EBIT
Taxes at 21%
Calculate operating cash flow
EBIT
Taxes
depreciation
operating cash flow
initial capital investment
free cash flows
operating cash flow
capital investment
free cash flows