You have been observing the progressive urbanization of Ganjlik area with interest. You

realize that the time is ripe for you to open and run a gym studio. You find an abandoned

warehouse which will meet your needs and rents for $$48,000/$ year. You estimate that it will

initially cost $$50,000$ to renovate the place and buy TechnoGym equipment for the center

$($there will be no salvage and the entire initial cost is depreciable$).$ Your market research

indicates that you can expect to get $500$ members, each paying $$500/$year$.$ You have also

found five instructors you can hire for $$24000$ a year each. Your tax rate, if you start making

profits, will be $20\%,$ 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 Bilasuvar in $10$ years,

answer the following questions:

a$.$ Estimate the annual after tax cash flows on this project.

b$.$ Estimate the net present value and internal rate of return for this investment. Would you

take it$?$