( Comprehensive problemlong dash calculating project cash flowsNPV, PI , and IRR ) Traid Winds Corporation, a...
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Question:
Comprehensive problemlong dashcalculating project cash flowsNPV, PI and IRRTraid Winds Corporation, a firm in the percent marginal tax bracket with a required rate of return or discount rate of percent is considering a new project. This project involves the introduction of a new product. The project is expected to last years and then, because this is somewhat of a fad product, it will be terminated. Given the following information. 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.
Use the simplified straightline method over years. It is assumed that the plant and equipment will have no salvage value after years. $
Shipping and installation costs: $
Unit sales:
Year Units Sold
Sales price per unit: $unit in years through $unit in year
Variable cost per unit: $unit
Annual fixed costs: $
Workingcapital requirements: There will be an initial working capital requirement of $ to get production started. For each year, the total investment in net working capital will be equal to percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years through then decrease in year Finally, all working capital is liquidated at the termination of the project at the end of year
The depreciation method: Use the simplified straightline method over years. It is assumed that the plant and equipment will have no salvage value after years.
Determine the free cash flows associated with the project.
The FCF in year is
year
year
year
year
year
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