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Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...

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Finance

Revenues generated by a new fad product are forecast as follows:Year Revenues 1 $40,000 2 30,000 3 20,000 4 10,000 Thereafter 0Expenses are expected to be 40% of revenues, and working capitalrequired in each year is expected to be 10% of revenues in thefollowing year. The product requires an immediate investment of$53,000 in plant and equipment. a. What is the initial investmentin the product? Remember working capital. b. If the plant andequipment are depreciated over 4 years to a salvage value of zerousing straight-line depreciation, and the firm’s tax rate is 20%,what are the project cash flows in each year? Assume the plant andequipment are worthless at the end of 4 years. (Do not roundintermediate calculations.) c. If the opportunity cost of capitalis 12%, what is the project's NPV? (A negative value should beindicated by a minus sign. Do not round intermediate calculations.Round your answer to 2 decimal places.) d. What is project IRR? (Donot round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)

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