1. What is the operating cash flow (OCF) for year 1 of project A that Middlefield Motors should use in its NPV analysis of the project? The tax rate is 30 percent. During year 1, the project A is expected to have relevant revenue of 82,000 dollars, relevant variable costs of 28,000 dollars, and relevant depreciation of 17,000 dollars. In addition, Middlefield Motors would have one source of fixed costs associated with the project A. Yesterday, Middlefield Motors signed a deal with Creative Advertising to develop a marketing campaign. The terms of the deal require Middlefield Motors to pay Creative Advertising either 29,000 dollars in 1 year if project A is pursued or 42,000 dollars in 1 year if project A is not pursued.

2. Oxygen Optimization is considering the caffeine project, which would involve selling caffeinated oxygen for 1 year. The firm expects sales of caffeinated oxygen to be 81,000 dollars and associated costs from providing caffeinated oxygen (such as tanks, filters, etc.) to be 50,000 dollars. The firm believes that sales of regular oxygen, which is currently sold by the firm, would be 37,000 dollars less with the addition of caffeinated oxygen, and that costs associated with regular oxygen to be 25,000 less with the addition of the caffeinated oxygen. Finally, Oxygen Optimization believes that the introduction of caffeinated oxygen would increase traffic to its facilities, which would increase expected sales of other products (such as masks) by 24,500 dollars more than it would be without the addition of caffeinated oxygen, and increase costs by 13,000 more than it would be without the addition of caffeinated oxygen. What is the relevant net income in year 1 that Oxygen Optimization should use to analyze the caffeine project? The tax rate is 20 percent, the cost of capital is 14.72 percent, and there is no relevant depreciation.