A Project to consider Blue Mesa Inc. (BMI is considering a 4-year project. The firm has already spent $24M on research and development efforts.(1To proceed with the project. BMI would need to spend another $6M on administrative advertising and training costs, and another $23M on production equipment 121 Marketing personnel estimate sales revenue of $20M $26M, 524M and $14M over the life of the project. Accounting and Operations have forecasted expense levels. They anticipate that the project will require annual fixed expenses of $5M and annual variable expenses equal to 30% of sales revenue. Because of fluctuations that may occur in demand levels, BMI will need to carry an inventory of their product during the project and it will be built up to 10% of expected sales in the next year. BMI anticipates that the new product will increase after tax cash flows gained from its current products by 4 cents for every dollar of new sales revenue. The firm expects that 20% of its annual sales will be charged to accounts receivable at the end of each year, while 30% of its annual expenses will be charged to accounts payable BM's corporate tax rate is 30%. The firm expects to raise $20M of the project's necessary investment capital by issuing bonds. These bonds will generate an annual interest expense of 53M. It will finance the project using 20% equity, at a cost of equity equal to 22%, and 80% debt 111 Part of these previous expenditures was used to build a testing facility. The facility has a current net salvage value of 54M and it will serve as part of the production facilities of the project is accepted. Some prototype production machinery was also purchased It currently has a net salvage value of SSM and will be sold regardless of whether the project is pursued or not 121 The equipment would be depreciated using a 5-year Straight-Line schedule and it is expected to have a market value of $24M at the end of the project Question 8 4 pts Assume the following are the correct cash flows for the project, and your cost of capital is 8%, what is the NPV for the project? These are not the actual values for this problem. Do not use the ones you calculated in earlier problems. ICF = -31 OCF[1] = 10 OCF[2] = 11 OCF[3] = 12 OCF[4] = 7 TCF = 6 06.44 million O 6.77 million O 15 million 13.9 million