1. Your pharmaceutical company is very interested in acquiring AllergyGone, a potential new anti-allergy drug with no known side effects. You have been asked to determine if this product is worth acquiring. You are provided with the projected income statements for a project.

Year	1	2	3	4	5
Revenues	$4,812,000	$5,850,350	$6,905,200	$7,998,167	$9,088,767
-Cost of Revenues	$3,609,000	$4,387,763	$5,178,900	$5,998,625	$6,816,575
-Depreciation	$500,000	$400,000	$300,000	$200,000	$100,000
EBIT

• The working capital is expected to be 5% of revenues, and the working capital investment has to be made at the beginning of each period. It is anticipated that the entire working capital will be salvaged at the end of fifth year.
• The tax rate is 32%
• The project requires an initial investment of $3,400,000.
• The discount rate is 12%
• The project is salvaged at the end of 5 years.