You and your friends own STURENT Inc, a real estate firm that helps students find rentals in CSUN neighborhood. Since you have realized that the average college student does not read newspapers or classifieds anymore, you are planning a project to take your company online and advertise new properties and vacancies online. Last year you hired an e-business consultant and paid her $20,000 to run pre-tests on a sample of CSUN students to see what the demand is for online rental services and whether your new web-site would be a profitable investment. The results of the e-business analysis show that such a website would increase your revenues by $600,000 a year. However, it also seems like most students still use the local rental magazines you publish, and the website is likely to decrease the revenue you get from your monthly publications by $100,000. You expect your variable costs to be 60% of the revenues and fixed costs to be $5,000 per year.

To start the website, you need to buy computers and equipment worth $350,000 that will be depreciated straight-line to zero over 5 years. Since you need a crew to keep the business running and the business updated, you need to invest $50,000 of working capital into the business at the start of the project. 75% of this working capital can be recovered at the end of the project.

All of you will graduate from college in 3 years, so you do not think you will keep the business after you graduate. Since the computers will be very old in 3 years, you can only sell them for a salvage value of $20,000.

The tax rate for your business is 34%, and the weighted average cost of capital (required rate of return) is 10%.

Please, if possible make a video, or at least show each step on how you get it if you are going to show using tables. thank you very much.

A) Find the cash flows that would be generated from this project. (Use the worksheet provided on the next page)