You are considering a project that will require an immediate capital expenditure of $400,000, which can be depreciated over the ten year life of the project, at which point the asset will be worthless. The project will entail operating costs of $60,000 per year and an immediate working capital expenditure of $45,000 that will be recovered in ten years. You expect project revenues to be constant at $97,000 throughout the ten year life of the project, with the first revenue payment arriving exactly one year from today and the tenth arriving ten years from today.

1. Assuming the discount rate is 9% and your tax rate is 25%, what is the NPV of this project?
2. You are now considering the possibility that cash flows may persist after the tenth year of the project. You expect these post-year 10 after-tax cash flows to start at some amount and grow at 4% forever. What would the after-tax cash flows have to start at in year eleven to make this project worth taking?