A.- what is the initial outlay associated with this project? B. What is the annual free cash flow associate with this project in Year 1? what is the annual free cash flow associated with this project in year 2? What is the annual free cash flow associated with this project in year 3? what is the annual free cash flow associated with this project in year 4? C. What is the terminal cash flow in year 5 ( that is what is in the free cash flow in gear 5 plus any additional cash flow associated with the termination of the project?) D. What is the project NPV given a required rate of return of the 15%

-Based on the NPV criterion should the project be accepted? E. what is the projects PI given a required rate of return of 15%

Based on the PI criterion should the project be accepted?

(Comprehensive problem) The Shome Corporation, a firm in the 22 percent marginal tax bracket with a required rate of return or cost of capital of 15 percent, is considering a new project. The project involves the introduction of a new product. This project is expected to last 5 years and then, because this is somewhat of a fad product, be terminated. Given the following information, E. determine the free cash flows associated with the project, the project's net present value, the profitability index, and the internal rate of return. Apply the appropriate decision criteria a. What is the initial outlay associated with this project? Data Table X $(Round to the nearest dollar.) Cost of new plant and equipment Shipping and installation costs $6,500,000 $180,000 Unit sales YEAR 1 2 3 4 5 UNITS SOLD 80,000 115,000 135,000 70,000 70,000 Sales price per unit Variable cost per unit Annual fixed costs Working-capital requirements Enter your answer in the answer box and then click Check $290/unit in years 1 through 4, 5240/unit in year 5 $120/unit $240,000 per year in years 1-5 There will be an initial working-capital requirement of $ 90,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. 11 parts Check Answer remaining Data Table 4 5 70,000 70,000 Sales price per unit Variable cost per unit Annual fixed costs Working-capital requirements $290/unit in years 1 through 4, 5240/unit in year 5 $120/unit $240,000 per year in years 1-5 There will be an initial working-capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Bonus depreciation method, and as a result the bonus depreciation occurs in year 1, with no depreciation in any other years. If any losses occur, they would be offset by profits in other areas of the company. Depreciation method (Comprehensive problem) The Shome Corporation, a firm in the 22 percent marginal tax bracket with a required rate of return or cost of capital of 15 percent, is considering a new project. The project involves the introduction of a new product. This project is expected to last 5 years and then, because this is somewhat of a fad product, be terminated. Given the following information, E. determine the free cash flows associated with the project, the project's net present value, the profitability index, and the internal rate of return. Apply the appropriate decision criteria a. What is the initial outlay associated with this project? Data Table X $(Round to the nearest dollar.) Cost of new plant and equipment Shipping and installation costs $6,500,000 $180,000 Unit sales YEAR 1 2 3 4 5 UNITS SOLD 80,000 115,000 135,000 70,000 70,000 Sales price per unit Variable cost per unit Annual fixed costs Working-capital requirements Enter your answer in the answer box and then click Check $290/unit in years 1 through 4, 5240/unit in year 5 $120/unit $240,000 per year in years 1-5 There will be an initial working-capital requirement of $ 90,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. 11 parts Check Answer remaining Data Table 4 5 70,000 70,000 Sales price per unit Variable cost per unit Annual fixed costs Working-capital requirements $290/unit in years 1 through 4, 5240/unit in year 5 $120/unit $240,000 per year in years 1-5 There will be an initial working-capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Bonus depreciation method, and as a result the bonus depreciation occurs in year 1, with no depreciation in any other years. If any losses occur, they would be offset by profits in other areas of the company. Depreciation method