The following is a simplified project income statement for Ma & Pa Incorporated. The project is expected to last for eight years. Its up-front cost is $2,000. Its cost of capital is 12 percent.

Sales........................................$925.00

– cash expenses...................... 310.00

– depreciation......................... 250.00

Earnings before taxes.......... $365.00

– taxes (at 35%)..................... 127.75

Net income............................$237.25

a. Compute the project’s after-tax cash flow.

b. Compute and interpret the project’s NPV, IRR, profitability index, and payback period.