Antonio Melton, the chief executive officer of SolomonCorporation, has assembled his top advisers to evaluate aninvestment opportunity. The advisers expect the company to pay$409,000 cash at the beginning of the investment and the cashinflow for each of the following four years to be thefollowing:

  

Year 1			Year 2			Year 3			Year 4
$	93,000		$	98,000		$	128,000		$	193,000

  

Mr. Melton agrees with his advisers that the company should usethe discount rate (required rate of return) of 14 percent tocompute net present value to evaluate the viability of the proposedproject. (PV of $1 and PVA of $1) (Use appropriatefactor(s) from the tables provided.)

   

Required

1. a. Compute the net present value of theproposed project. Should Mr. Melton approve the project?(Negative amounts should be indicated by a minus sign.Round your intermediate calculations and final answer to thenearest whole dollar.)

2. b.&c. Shawn Love, one of the advisers, iswary of the cash flow forecast and she points out that the advisersfailed to consider that the depreciation on equipment used in thisproject will be tax deductible. The depreciation is expected to be$81,800 per year for the four-year period. The company’s income taxrate is 40 percent per year. Use this information to revise thecompany’s expected cash flow from this project. Compute the netpresent value of the project based on the revised cash flowforecast. Should Mr. Melton approve the project? (Negativeamount should be indicated by a minus sign. Round your intermediatecalculations and final answer to the nearest wholedollar.)

a.	Net present value	not attempted
	Should Mr. Melton approve theproject?	not attempted
b.&c.	Net present value	not attempted
	Should Mr. Melton approvethe project?