FIN$312$ CAPITAL BUDGETING COMPREHENSIVE EXERCISE #$1$M$-$For$-$Mobile Inc. is considering a proposal to manufacture high$-$end phone covers for all modelsof iPhone $15.$The project will be located on a piece of land owned by the company with a market value of$$180,000$ and requires an upfront investment into machines of $$1\mathrm{.}5$ million.These machines can be fully depreciated straight$-$line over the next $5$ years with a salvage$/$residualvalue of $$350,000.$M$-$For$-$Mobile Inc. anticipates that the machine could be sold for $$500,000($market value$)$ at theend of the projects life.M$-$For$-$Mobile Inc. has also paid $$85,000$ to a company to conduct market feasibility study for theproduct. Besides the market feasibility study expenses, the company has also paid $$115,000$ forresearch and development for the products.On average, the sales of phone covers are expected to be $70,000$ units annually at an average priceof $$40\mathrm{.}25$ per unit for the duration of the project.Total annual manufacturing costs and operating expenses are $75\%$ of sales.Total annual fixed cost is estimated to be $$100,000.$M$-$For$-$Mobiles tax rate is at $35\%$ and the required rate of return for such a project is $15\%.$Finally, the project requires an initial investment into net working capital equal to $8\%$ of predictedfirst$-$year sales and the amount is expected to remain the same throughout the projects life.Required:A$.$ Calculate the initial capital outlay required in Year $0$ for the project. $(2$ marks$)$B$.$ Prepare the concise income statement of the company in the table below and calculate theincremental annual operating cashflow from Year $1$ to Year $5$ assuming there is no inflationin the next table. $(5$ marks$)$Income Statement for M$-$For$-$Mobile Inc.Sales revenueManufacturing & operating cost$(-)$ DepreciationEBITTaxNet IncomeOPERATING ANNUAL FREE CASH FLOW CALCULATIONEBITOperating Annual Free Cash flowC. Calculate the terminal $($ending$)$ cashflow in Year $5.($Hint: You must calculate the Net Proceeds after tax of the sale of machine to be includedin the calculations$)(2$ marks$)$TERMINAL CASH FLOW CALCULATIONSOperating annual cash flowsNetworking CapitalNet proceeds from sale of assetTotal Terminal Cash FlowsD. Calculate the NPV of the project and decide whether the project should be accepted or notand why.