Depreciation method Use the simplified straight-line method over 5 years. Assume that the plant and equipment will have no salvage value after 5 years. 11-14. (Comprehensive problem) The Home Corporation, a firm in the 21 percent marginal tax bracket with a 13 percent required rate of return or cost of capital , is considering a new project. This project involves the introduction of a new palm oil strain. The project is expected to last 5 years and then, due to diminishing yields , 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. TER 11 Cash Flows and Other Topic Cost of new plant equipment Shipping and installation costs $15,200.000 $ 180,000 UNIT SALES YEAR UNITS SOLD 75.000 2 118,000 3 118,000 Sales price per unit Variable cost per unit Annual fixed costs Working-capital requirements 4 85,000 5 75,000 $320/unit in years 1 through 4, $230/unit in year 5 $150/unit $680,000 per year in years 1-5 There will be an initial working-capital requirement of $175,000 just to get production started. For each year, the total investment in net working capital will equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 and 2, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Depreciation method Use the simplified straight-line method over 5 years. Assume that the plant and equipment to new palm oil strain will have no sal- vage value after 5 years