You are given the following information concerning a project for Havana:
• The corporation is considering to produce a new range of flip-flops – the flop-flip - that they have been assured by their marketing department will be extremely popular among 18 to 25 year olds.
• Havana expects that flop-flips will sell mostly in California and New York.
• The corporation will need to set up a new manufacturing plant to produce the flop-flips. The plant would cost of $30 million.
• The project involving the flop-flips will be for five years.
• They predict the most popular color will be white.
• Three years ago Havana completed a project investigating whether the market was ready for flop-flips. The project cost $2.5 million and concluded “No”.
• The project will involve zero investment in net working capital.
• There are zero taxes.
• The firm’s discount rate is 6%.
• For simplicity, ignore depreciation (i.e. assume it is 0) and any cash flows related to salvage value.
What is the level ($ amount) of operating cash flows each year if the project has a NPV of $10 million? (the operating cash flow is the same each year)