Otobai Co. is considering investing in a project. The following table shows the expected values of the relevant variables of the project. For simplicity, lets assume that all the numbers are in US dollars. Discount rate r = 10%.

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Year 0 Year 1 - 10

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Investment -15

Sales 37.5

Variable costs 30

Fixed coss 3

Depreciation 1.5

Pretax profit 3

Taxes at 50% 1.5

Profit after tax 1.5

Operating cash flows 3.0

Net cash flow -15 3.0

Otobai Co. is considering investing in a project. The following table shows the expected values of the relevant variables of the project. For simplicity, lets assume that all the numbers are in US dollars. Discount rate r = 10%. . Year 0 Year 1 - 10 --------------------------------------------------- Investment -15 Sales 37.5 Variable costs 30 Fixed coss 3 Depreciation 1.5 Pretax profit 3 Taxes at 50% 1.5 Profit after tax 1.5 Operating cash flows 3.0 Net cash flow -15 3.0 A new minimum wage law is likely to pass. If so, the variable costs will increase by 10%. Everything else remains unchanged. What would be the annual cash flow from Year 1 through Year 10?

A 10% increase in oil price is likely to increase Otobais fixed costs by 20%. Everything else remains unchanged. What would be the annual cash flow from Year 1 through Year 10?