Problem:

You purchase equipment for $100,000, and it costs $20,000 to have it delivered and installed. The equipment will be depreciated straight-line to a zero book value over 5 years. You can sell the equipment for $15,000 when you are done with it in 5 years. The company's marginal tax rate is 40%. What is the depreciation expense each year and the after-tax salvage in year 5?

Required:

Question 1: Assume that you project the net income of the next five years is $15000, 25000, 37000, 16000, 22000 respectively. The project require an initial investment in net working capital of $6,000, which will be fully recovered at the end of project's life.

Question 2: Please find out the operating cash flow and cash flow from asset for the investment over the five years.

Question 3: Calculate the NPV of the project assume that you require a 15% return.

Note: Show supporting computations in good form.