You are provided with the projected income statements for a project:

Year	1	2	3	4
Revenues	$9,000	$10,000	$11,000	$12,000
- Cost of goods sold	$4,000	$4,400	$4,800	$5,200
- Depreciation	$4,000	$3,000	$2,000	$1,000
= EBIT	$2,000	$3,600	$5,200	$6,800

The project required an initial investment of $15,000 and an additional investment of $5,000 at the end of year 2. These investments can be salvaged at their remaining book value at the end of the project life. The working capital is anticipated to be 10% of revenues, and the working capital investments have to be made at the beginning of each period. The working capital investments are salvaged at the end of the project life. R&D expenses of $1,000 have already been incurred and cannot be recovered if the project is rejected. The cost of capital is 15%. The tax rate is 40%.

a. (12 Marks) Estimate the cash flow to the firm for each of the four years.

b. (2 Marks) Estimate the payback period for investors in the firm.

c. (3 Marks) Estimate the NPV to investors in the firm. Would you accept the project?

d. (3 Marks) Estimate the IRR of the project. Would you accept the project?