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(This question counts for a total of 12 points) ATT is considering a project. The project requires to purchase an equipment with a cost of $1.55 million. The equipment will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project it will be sold for a market value of $240,000. The project will not change sales but will reduce operating costs by $399,000 per year. The project also requires an initial investment of $52,000 in net working capital, which will be recouped when the project ends. The tax rate is 34 percent. Answer the following questions by providing both your calculation steps (along with the formula) and the calculation result. (Calculation steps will be used for partial credit) (1) (3 points) What is the cash flow of the project in year 0 (or at the beginning of the project)? (2) (3 points) What is the cash flow of the project in each year from year1 to year 8? (3) (3 points) What is the cash flow of the project in year 9 (or the ending year)? [hint: there are 3 cash flow items, for example after-tax salvage value] (4) (3 points) What is the project's NPV if the required return is 11.5 percent? [hint: the answer for NPV value is one of the following choices:] A. $215,433 B. $276,945 C. $268,011 D. $225,225 E. $257,703

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