1.Sway's Back Store is considering a project which will require the purchase of $1.5 million in new equipment. The equipment will be depreciated straight-line to a book value of $0.5 million over the 5-year life of the project. Annual sales from this project are estimated at $950,000. The variable cost is 40% of the annual sales and there is an annual fixed cost of $100,000. Sway's Back Store will sell the equipment at the end of the project for a salvage value of $0.7 mil. Additional net working capital equal to $0.4 mil to support the project. All of the new net working capital will be recouped at the end of the project. The firm desires a minimal 10% rate of return on this project. The tax rate is 40%.

Annual Depreciation=$200,000 annually

TAX on salvage=$80,000

The operating cash flow=$362,000

The projects NPV=$105,587.60

initial investment=$1,900,000

PV of cash flow= $2,005,587.60

I have to fill in the chart

Year O Year i Year 2 Year 3 Year ! Year Capital xpanditure A in NWC Oper Cl Salvage Cl Free CI'S