A 6 year capital projcect, code name Jackal, costs $27,695 (year 0). It is expected to produce the following operating cash flows (revenues minus expenses)

Year        Operating Cash Flows

1             $6,250

2               6,688

3              7,156

4             7,657

5              8,192

6             8,766

Project NPV (sale of existing Asset)

The Jackal project will be depreciated, straight line, over its 6 year life. The corporate tax rate is 34%, and the required rate of return on the project is 9%. The Jackal project will replace the existing Condor project that has a book value of $2,000. The Condor project will be sold for $3.500.

A. Calculate the initial investment (year 0) cash flows for this project.

B. What is the projects NPV?

C. If the Condor project had a book value of $4,000, how would that change the NPV of the Jackal project?

D. How would a reduction in the corporate tax rate to 26% change your answer in parts b and c?