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The Rodriguez Company is considering an average-risk investmentin a mineral water spring project that has a cost of $170,000. Theproject will produce 1000 cases of mineral water per yearindefinitely starting at year 1. The year-1 sales price is $138 percase, and the current cost per case is $105. The firm is taxed at arate of 25%. Both prices and costs are expected to rise after year1 at a rate of 6% per year due to inflation. The firm uses onlyequity, and it has a cost of capital of 15%. Assume that cash flowsconsist only of after-tax profits because the spring has anindefinite life and will not be depreciated.What is the present value of future cash flows? What is theNPVSuppose that the company had forgotten to include futureinflation. What would they have incorrectly calculated as theproject’s NPV?