You are evaluating a project with a 4 year life.Sales revenue is projected to be $320,000 in year 1, $400,000 in year 2, $424,000 in year 3, and $475,000 in year 4. Operating expenses (excluding depreciation) are $200,000 per year. The project requires an initial investment in equipment of $240,000 which will be depreciated straight-line to zero over its four-year life. However, the actual market value of the equipment at the end of year 4 is expected to be $23,000.The level of net working capital required in each year is projected to be 10% of sales in the following year. The tax rate is 40% and the required return on the project is 15%.

(a)What isoperatingcash flow in the second year (t=2) of the project?

(b)What is the investment in net working capital in the third year (t=3) of the project? Indicate clearly whether this would be a positive or negative number in your cash flow worksheet.

(c)What is the after-tax cash flow from the sale of the equipment in year 4?