Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a piece of equipment for $140,000. The equipment would have a useful life of five years and zero salvage value. It would be depreciated for financial reporting and tax purposes using the straight-line method. After careful study, Winthrop estimated the following annual costs and revenues for the new product: Annual revenues and costs: Sales revenues $ 350,000 Variable expenses $ 195,000 Fixed out-of-pocket operating costs $ 85,000 The companys tax rate is 30% and its after-tax cost of capital is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required: 1. Calculate the annual income tax expense that will arise as a result of this investment.

2. Calculate the net present value of this investment opportunity.