1. This data applies to the first six questions:

   The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new asset. The asset would require the use of an extra building that the firm is not presently using, but could be sold in the real estate market for $60,000. An analysis of the project showed the following data:

   MACRS class (depreciation):	3-year (33%, 45%, 15%, 7%)
   Economic Life:	4 years
   Price:	$300,000
   Freight and Installation:	$30,000
   Salvage Value:	$60,000
   Effect on NWC :	Increase by $10,000
   Revenues:	$300,000/year (100,000 units at $3.00/unit)
   Costs excluding depreciation:	$150,000/year (Fixed Cost $50,000; VC = $1.00/unit)
   Year 1 Depreciation	$108,900.00
   Year 2 Depreciation	$148,500.00
   Year 3 Depreciation	$49,500.00
   Year 4 Depreciation	$23,100.00
   Sale Price of Building	$60,000.00
   Tax rate:	40%
   Cost of capital	10%

   The Project Cash Flow Table below is provided to assist you in calculating the relevant after-tax cash flows, and then answer the questions concerning investment cost, cash flows, and net present value.

   Year	0	1	2	3	4
   Total Revenues
   Operating Costs (exc. dep)
   Depreciation
   Earnings before taxes
   Taxes
   Net income
   Depreciation
   Net operating cash flows
   Equipment Cost
   Installation
   Change in Net Working Capital
   Opportunity Cost of Project
   Salvage Value
   Tax on Salvage Value
   Return of NWC
   NET CASH FLOWS

   Question 1: What is the net investment required at t = 0?Answer

   		-$340,000
   		-$350,000
   		-$390,000
   		-$400,000
   		-$460,000

4 points

Question 2

1. What is the operating cash flow in Year 1?

   Answer

   		$94,800
   		$109,800
   		$115,600
   		$133,560
   		$149,400

4 points

Question 3

1. What is the operating cash flow in Year 2?

   Answer

   		$94,800
   		$109,800
   		$115,600
   		$133,560
   		$149,400

4 points

Question 4

1. What is the operating cash flow in Year 3?

   Answer

   		$94,800
   		$109,800
   		$115,600
   		$133,560
   		$149,400