A Firm Is Considering a Project That Requires an Initial

A firm is considering a project that requires an initial investment of $300,000 in new equipment, which has a five-year life and a CCA rate of 30%.An initial investment in raw materials inventory of $50,000 is also required to support the project, which will rise to 15% of sales.The project will generate sales revenue of $400,000 in the first year, which will grow at 4% per year.Variable costs will be $220,000 for the first year, which will grow at 6% per year.The project's fixed costs are $40,000 per year.The expected salvage value of the asset is $45,000 at the end of five years.The firm's marginal tax rate is 40% and required return is 12.5%.Assume the asset class remains open after the project terminates and the half-year rule will apply in the first year.
a)What is the present value of the CCA tax savings?
b)What is the present value of the after-tax operating cash flow?
c)What is the present value of the change in net working capital?
d)What is the NPV of the project?