Taylor Mountain Uranium Company

Taylor Mountain Uranium Company currently has annual cash revenues of
$1,200,000 and annual cash expenses of $700,000. Depreciation amounts to
$200,000 per year. These figures are expected to remain constant for
the foreseeable future (at least 15 years). The firm's marginal tax rate
is 40%. A new high-speed processing unit costing $1,200,000 is
being considered as a potential investment designed to increase the
firm's output capacity. This piece of equipment will have an estimated
usable life of 10 years and a $0 estimated salvage value. If the
processing unit is bought, Taylor's annual cash revenues are expected to
increase to $1,600,000, and annual cash expenses will increase to
$900,000. Annual depreciation will increase to $320,000. a. Compute
the firm's annual net cash flows (NCF) for capital budgeting purposes
for the next 10 years, assuming that the new processing unit is
purchased.