Question 6: Major Motors is considering a new project, which requires an investment of $2 million. The project is expected to generate sales revenue of $1 million in the first year, $2 million in the second year and $3 million each for years 3, 4, and 5. The cost of goods sold is expected to be 75 % of sales revenue. Other costs are expected to be 7% of sales in the first year and 5 % of sales thereafter. The project will need working capital investment of $200,000 in the first year and an additional $100,000 in the second year. The investment in plant ($2 million) will be depreciated using the straight line method towards a zero salvage value. The tax rate for the company is 30% and the opportunity cost of capital is 10%. Assume that the plant will operate for 5 years, and at the end of 5 years, the plant can be sold for a salvage value of $300,000. Find the net cash flows for the project in years 0-5. b. Calculate the NPV and give an advice to the board as to what the company should do. a