You have been observing the progressive gentrification of your city with interest. You realize that the time is ripe for you to open and run an aerobic exercise centre. You find an abandoned warehouse that will meet your needs. It rents for $48,000 a year. You estimate that it will initially cost $50,000 to renovate the place and buy Nautilus equipment for the centre (there will be no salvage value, and the entire initial cost is depreciable). Your market research indicates that you can expect to get 500 members each paying $500/year. The members are expected to grow @ 5% per year with a max. capacity of 1000 members. The subscription fee is expected to grow @ 3% per year which is also the rate of inflation. You have also found five instructors you can hire for $24,000 a year each. The number of instructors will remain the same throughout the life of the project. Your tax rate, if you start making profits, will be 40% and you choose to use straight line depreciation on your initial investment. If your cost of capital is 15% and you expect to retire to the Bahamas in 10 years, answer the following questions:

a. Estimate the after tax operating income each year on this project

b. Estimate the after tax cash flows on this project

c. Estimate the after tax incremental cash flows on this project

d. Estimate the time weighted incremental cash flows on this project

e. Calculate the NPV of the project & comment if you will accept the project or not?