View the Proforma Income statement below.

Now lets consider some additional factors. First, production of the implants will require $2,500,000 in networking capital to start and additional networking capital investments each year equal to 15 percent of the projected sales revenue increase for the following year. That is, the additional NWC in year 1 will be .15(Revenue in year 2 Revenue in year 1). In the final year of the project, EEI will recoup all of its NWC. Consider the following example. When someone opens a kiosk in the mall to sell Christmas ornaments from October 1 to January 31, that person has to make an investment in NWC, most notably an inventory of ornaments. Once January 31 comes, we assume that all the ornaments are sold and the person gets back their working capital.

Year	1	2	3	4	5	6
Unit Sales	110,000	127,000	115,000	98,000	92,000	75,000
Price	455	455	455	455	455	455
Total Sales	50050000	57785000	52325000	44590000	41860000	34125000
Variable Cost	34650000	40005000	36225000	30870000	28980000	23625000
Fixed Cost	1,850,000	1,850,000	1,850,000	1,850,000	1,850,000	1,850,000
Cost of Equipment	27,500,000	27,500,000	27,500,000	27,500,000	27,500,000	27,500,000
Depreciation set by MACRS	14.29	24.49	17.49	12.49	8.92	8.93
Depreciation of Equipment	3929750	6734750	4809750	3434750	2453000	2455750
EBIT	9,620,250	9,195,250	9,440,250	8,435,250	8,577,000	6,194,250
Tax at 22%	2116455	2022955	2076855	1855755	1886940	1362735
Net Income= EBIT- Tax	7,503,795	7,172,295	7,363,395	6,579,495	6,690,060	4,831,515
Operating Cash flow= Net income + dep.	11,433,545	13,907,045	12,173,145	10,014,245	9,143,060	7,287,265

Also, assume that the equipment will be sold for 20% of its acquisition cost in year 6 and that the cost of capital is 18%.

Compute the following:

1. Payback period
2. Profitability index
3. Net present value
4. Internal rate of return