Use the following information to answer questions 1 and 2.

DeLorm Productions is considering the introduction of a new product. Production of the new product requires an investment of $150,000 in equipment that has a five-year life. The equipment has no salvage value at the end of five years and will be depreciated on a straight-line basis. DeLorm's required return is 15%, and the tax rate is 34%. The firm has made the following forecasts:

	Base case	Lower bound	Upper bound
Unit sales	29,000	1,750	2,250
Price per unit	$55	$50	$60
Variable costs per unit	$22	$21	$23
Fixed costs per year	$10,000	$9,500	$10,500

1.

a. Compute the annual OCF for the project, using the base case forecast for each variable.

b. Compute the NPV for the project, using the base case forecast for each variable.

2.

Compute the NPV and the IRR for the project under the best case and worst case scenarios.