Year 1	Year 2	Year 3	Year 4	Year 5
Cash inflow from operations (pre-tax)	$ 80,000	$90,000	$110,000	$120,000	$130,000
Depreciation on tax return	(70,000)	-70,000	-80,000	-40,000	-40,000
Taxable income	10,000	20,000	30,000	80,000	90,000
Tax rate	21%
Cash payment for income taxes	$ 2,100	$4,200	$6,300	$16,800	$18,900

Make sure to show dollar signs on the first and last number of each column. Format and align your numbers with commas and underlines on all schedules.

Now that we know the cash payment for income taxes, we can compute the after-tax cash flows. Complete the schedule below (5 points)

	Year 1	Year 2	Year 3	Year 4	Year 5
Cash inflow from operations	$80,000	$90,000	$110,000	$120,000	$130,000
Cash payment for income taxes	-2,100	-4,200	-6,300	-16,800	-18,900
After-tax cash flows	$77,900	$85,800	$103,700	$103,200	$111,100

Requirement 3:

Compute the net present value and indicate whether it is positive or negative (round amounts to nearest dollar). Complete the schedule below. (10 points).

Year	Annual net after-tax cash inflows	PV Factor	Present Value
1
2
3
4
5
	Total present value
	Investment required		300,000
	Net positive present value

Requirement 4: Compute the cash payback period. Complete the following schedule. (3 points)

Year	Annual net after-tax cash inflows	Cumulative Cash Payback
1
2
3
4
5

From this schedule, what is the payback period for this project? Show computations here:

Requirement 5: Compute the average rate of return by completing the schedule below. (5 points)

Annual net income from investment	Year	Amount
	1
	2
	3
	4
	5
	Total
Average annual net income from investments
Average investment
Average rate of return

Requirement 6: Based upon your results for Requirements 3, 4 and 5, would you recommend U of M make this $300,000,000 investment? Explain using at least 2 complete sentences. (5 points)