Year 1: $500,000
Year 2: $600,000
Year 3: $700,000
Year 4: $800,000
Year 5: $900,000
The cost of building the plant is $2,500,000. The plant will be depreciated straight-line to zero over its 5-year life. The firm's tax rate is 40 percent. The firm's cost of capital is 10 percent. The firm's required rate of return on new investments is 15 percent. The firm's required rate of return on existing investments is 20 percent.