Suppose you are evaluating a project for The Ultimate Golf Club, guaranteed to correct the hacker's slice. You estimate the sales price of The Ultimate to be $400 and sales to be 1,000 units per year. You figure the project has a life of 3 years. Variable costs amount to $200 per unit and fixed costs are $120,000 per year. The project requires an initial investment of $165,000 which is depreciated straight-line over 5 years. The actual market value of the initial investment after year 3 is $45,000. Net working capital investment is $75,000. The tax rate is 34%.

The risk of this project is very similar to the company's other businesses. The company's capital structure is as follows:

Common Stock: 1 million shares outstanding, currently selling for $35 per share. The stock has a Beta of 1.2.

Bonds: 20,000 bonds outstanding, $1000 face value for each bond, 7% annual coupon, 10 years to maturity, Selling at 100% of par.

Market risk premium: 8%

Risk free rate: 6%

a. What is the project's operating cash flow during its three-year life? (8 points)

b. What is the project's total cash flows? (8 points)

c. What is the firm's WACC? (8 points)

d. What is the project's NPV? (8 points)

e. What are the minimum operating cash flows needed for the NPV to be zero? (8 points)