1. Compute the payback (using free cash flow) period for investors in firm.

3. (25 points) Problem - FCF and NPV Your company is considering a project for which you oversee the analysis. The company has spent $100,000 on research & development leading up to the project. The projected income statements for this project are: Year Revenues - Cost of Goods Sold - Depreciation = EBIT 1 2 3 $500,000 $550,000 $605,000 250,000 275,000 302,500 200,000 200,000 200,000 50,000 75,000 102,500 4 $665,500 332,750 200,000 132,750 The project requires the capital expenditure of $1,000,000 today. At the end of the economic life of the project (i.e., year 4), the firm will salvage the book value (see table for the depreciation schedule). Non- cash working capital is anticipated to be 10% of the revenues and must be made at the beginning of each period. In the last period the firm will recover all investment in non-cash working capital. The firm faces a 37% marginal tax rate. The cost of capital is 10%