The 4-year project requires equipment that costs $60,000. If undertaken, the shareholders will contribute $55,000 cash and borrow $5,000 at 5% with an interest-only loan with a maturity of 4 years and annual interest payments. The equipment will be depreciated straight-line over the 4-year life of the project. There will be a pre-tax salvage value of $5,000. There are no other start-up costs at year 0. During years 1 through 4, the firm's before-tax operating cash flow will be 20,000. i = rdebt = 5%, Ku = 7%, K = TWACC = 6.5% Debt-to-equity ratio = 3 Risk-free rate = 2% T = Tax rate = 34% CFo = $60,000 CF1-4 =$17, 875 = 20, 000 x (1 - 0.34) + $13, 750 x 0.34 OCF1--4 1-T D1--4 T For year 4, on top of $17,875, there is also TV4 =$5,000x (1 - .34)