Waba Industries is considering a new three-year expansion project that requires an initial fixed asset investment of $1.2 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, at which time it will be worthless. The project is estimated to generate $1 million in annual sales, with costs of $500,000.

A) If the tax rate is 35%, what is the OCF for this project?

B) Suppose the required return on the project is 8%. What is the projects NPV?

C) Suppose the project requires an initial investment in net working capital of $100,000 and the fixed asset has a market value of $175,000 at the end of the project. What is the projects Year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV?