Question 1: What is the initial cash flow at t=0?

Question 2: What is the operating cash flow in Year 1?

Question 3: What is the total terminal (non-operating) cash flow at the end of Year 3?

Question 4: Given that the operating cash flow for year 2 is $22,800, and the operating cash flow for year 3 is $15,600, what is the projects NPV if the projects cost of capital is 10%?

You have been asked by the president of the Farr Construction Company to evaluate the proposed acquisition of a new earth mover. The mover's basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that the mover falls into the MACRS three- year class (allowance percentages 33%, 45%, 15%, 7%), would be sold after 3 years for $20,000 and would require an increase in net working capital (spare parts inventory) of $2,000. The earth mover will have no effect on revenues, but it is expected to save the firm $20,000 per year in before-tax operating costs, mainly labor. The firms' marginal tax rate is 40%. Assume that the net working capital investment will be recouped at the end of year 3