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You are considering a 4 year project that requires upfront investment in a piece of production machinery to serve increased market demand for protective gear.

You are considering a 4 year project that requires upfront investment in a piece of production machinery to serve increased market demand for protective gear. The initial equipment investment is $5000 and it is depreciated straight line to 20% of its initial cost by the end of the project in year 4. Product revenues from the sale of the gear are forecasted below, and project operating costs should be 60% of sales. Year 1 2 3 4 Project Sales ($) 6400 7400 8400 9500 The project will also require $500 in net working capital investment to start, and a further $300 in net working capital investment will take place in year 1. The projects net working capital will be reduced to zero at the end of the project. In four years, the equipment will be sold at the salvage value which is 20% of its initial cost.The relevant tax rate is 30%, and the required return is 15%. Use the above information to answer the following questions. a) What is the Project cash OUTFLOW at time zero. Include all contributions. DO NOT enter your answer with a negative sign. b) What is the forecasted operating cash flow (OCF) in year 2? c) What is the forecasted Total Project Cash Flow in year 4? d) Using the relevant discount rate given above what is your estimate for the NPV of the project? Enter your answer to two decimal places, without a $ sign and do not use a comma. e) Should the project be accepted? (Enter Yes or No)

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