1. Maria Bakery is considering a 3-year project with an initial cost of $93,000. The project will not directly produce any sales but will reduce operating costs by $31,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $43,270. The tax rate is 34 percent and the required return is 10 percent. An extra $12,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3?

$72,360.75

$80,375.96

$91,599.44

$96,848.84

$102,219.50

2. A project will produce an operating cash flow of $403,000 a year for three years. The initial cash outlay for equipment will be $870,000. The net aftertax salvage value of $50,000 will be received at the end of the project. The project requires $72,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 15 percent?

$44,666.28

$53,216.81

$58,356.70

$55,450.16

$49,730.25