Arabelle is considering expanding the floor area of her high- fashion import clothing store, The French Prints of Arabelle, by increasing her leased space in the upscale Cherry Creek Mall by 50 percent from its current size of 200 square metres. The Cherry Creek Mall boasts one of the country's highest ratios of sales value per square metre. Rents (including utilities, security, and similar costs) are $11 per square metre per year. Salary increases related to French Prints' expansion are shown in the following table, along with projections of sales per square metre. The purchase cost of goods sold averages 70 percent of the sales price. Sales are seasonal, with an important peak during the year-end holiday season.

a. If Arabelle expands French Prints at the end of year 0, what will her quarterly cash flows be through year 2?
b. Project the quarterly cash flows assuming that the sales pattern (10 percent annually compounded increase) continues through year 3.

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YEAR QUARTER INCREMENTAL SALARIES $12 000 600 1100 2400 990 660 1210 2640 2 000 24 000 2 000 2 000 24 000