Table 1: Allied's Lemon Juice Project I. Investment Outlays Equipment cost Shipping and Installation CAPEX Increase...

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Table 1: Allied's Lemon Juice Project I. Investment Outlays Equipment cost Shipping and Installation CAPEX Increase in inventory Increase in Accounts Payable ANOWC II. Project Operating Cash Flows Unit sales Price per unit Total revenues Operating costs (w/o deprn) Depreciation Total costs EBIT (Operating income) Taxes on operating income EBIT (1-T) = After Tax operating income Add back depreciation EBIT (1-T) + DEP III. Project Termination Cash Flows Salvage value Tax on salvage value After-tax salvage value Years 0 1 2 3 4 X X X X X X X $ 1.60 $ 195,000 1.60 $ X 1.60 $ X X X $ 1.60 312,000 X X 124,800 X X X x 97,600 48,800 $ 320,000 $ 271,200 X X X X $ 89,600 X (1,840) X x 31,832 X X $ 195,200 X $0 $ 189,040 X 68,992 97,600 X $ X 48,800 155,368 $45,000 (10,350) 34,650 ANOWC = Recovery of NOWC $30,000 Project Free Cash Flows = $ (518,000) X X x $ 220,018 EBIT(1-T) + DEP - CAPEX - ANOWC Part (B) Calculate the project's NPV, IRR, MIRR, and payback. Do these indicators suggest that the project should be accepted? Explain. Part (C) 1. What is sensitivity analysis? 2. Perform a sensitivity analysis on the unit sales, salvage value, and WACC for the project. Assume that each of these variables deviates from its base-case, or expected value by plus or minus 10%, 20%, and 30%. Calculate NPV for each case (21 NPV in total: 7 NPV for change in unit sale; 7 NPV for change in salvage value; and 7 NPV for change in WACC), then draw a graph with three lines (one for Unit Sales, one for Salvage Value, and one for WACC, all three lines in the Table 1: Allied's Lemon Juice Project I. Investment Outlays Equipment cost Shipping and Installation CAPEX Increase in inventory Increase in Accounts Payable ANOWC II. Project Operating Cash Flows Unit sales Price per unit Total revenues Operating costs (w/o deprn) Depreciation Total costs EBIT (Operating income) Taxes on operating income EBIT (1-T) = After Tax operating income Add back depreciation EBIT (1-T) + DEP III. Project Termination Cash Flows Salvage value Tax on salvage value After-tax salvage value Years 0 1 2 3 4 X X X X X X X $ 1.60 $ 195,000 1.60 $ X 1.60 $ X X X $ 1.60 312,000 X X 124,800 X X X x 97,600 48,800 $ 320,000 $ 271,200 X X X X $ 89,600 X (1,840) X x 31,832 X X $ 195,200 X $0 $ 189,040 X 68,992 97,600 X $ X 48,800 155,368 $45,000 (10,350) 34,650 ANOWC = Recovery of NOWC $30,000 Project Free Cash Flows = $ (518,000) X X x $ 220,018 EBIT(1-T) + DEP - CAPEX - ANOWC Part (B) Calculate the project's NPV, IRR, MIRR, and payback. Do these indicators suggest that the project should be accepted? Explain. Part (C) 1. What is sensitivity analysis? 2. Perform a sensitivity analysis on the unit sales, salvage value, and WACC for the project. Assume that each of these variables deviates from its base-case, or expected value by plus or minus 10%, 20%, and 30%. Calculate NPV for each case (21 NPV in total: 7 NPV for change in unit sale; 7 NPV for change in salvage value; and 7 NPV for change in WACC), then draw a graph with three lines (one for Unit Sales, one for Salvage Value, and one for WACC, all three lines in the