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Carsen Sorensen, controller of Thayn Company, just received thefollowing data associated with production of a new product:Expected annual revenues: $750,000Projected product life cycle: five yearsEquipment: $800,000 with a salvage value of $100,000 after fiveyearsExpected increase in working capital: $100,000 (recoverable atthe end of five years)Annual cash operating expenses: estimated at $450,000Required rate of return: 8 percentThe present value tables provided in Exhibit 19B.1 and Exhibit19B.2 must be used to solve the following problems.Required:1. Estimate the annual cash flows for the newproduct. Enter cash outflows as negative amounts and cash inflowsas positive amounts.YearCash Flow0$1–4$5$2. Using the estimated annual cash flows,calculate the NPV.$3. What if revenues were overestimatedby $150,000? Redo the NPV analysis, correcting for this error.Assume the operating expenses remain the same. Enter cash outflowsas negative amounts and cash inflows as positive amounts.YearCash FlowPresent Value0$$1–45Net present value$
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