405 PROBLEM 7C-4 Income Taxes and Net Present Value Analysis L07-8 Rosman Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Rosman estimated the following costs and revenues for the project: Cost of now equipment needed.. $420,000 Sale of old equipment no longer needed $80,000 Working capital needed... $65,000 Equipment maintenance in each of Years 3 and 4. $20,000 Annual revenues and costs: Sales revenues $410,000 Variable expenses $175,000 Fixed out-of-pocket operating costs $100,000 The new piece of equipment mentioned above has a useful life of five years and zero salvage value. The old piece of equipment tioned above would be sold at the beginning of the project and there would be no gain or loss realized on its sale. Rosman uses the straight line depreciation method for jepe 405 finnocial reporting and tax purposes. The company's tax rate is 30% and its after-tax cost of capital in 12%. When the project coachides in five years the working capital will be released for investment elsewhere within the company Required: 1. Calculate the annual income tax expense for each of Years 1 through that will arise as a result of this investment opportunity 2. Calculate the net present value of this investment opportunity