PART 1: Please answer and upload the following question as Excel document.

The Dophical Corporation, a firm in the 34% marginal tax bracket with a 15% required rate of return or cost of capital, is considering a new project. This project involves the production of a new product. This project is expected to last five years.

Cost of New Capital and Equipment: $198,000,000

Shipping and Installation Costs: $2,000,000

Unit Sales:YearUnit Sold

11,000,000

21,800,000

31,800,000

41,200,000

5700,000

Sales price per unit: $550/unit in year 1-4, $600/unit

Variable cost per unit: $400/unit

Annual Fixed Costs: $50,000,000

Working Capital Requirements: There will be an initial working capital requirement of $2,000,000 just to get production started. For each year, the total investment in net working capital will equal 10% of the dollar valueof sales for that year. Finally, 90% of all working capital is liquidated at the termination of the project at the end of year 5.

The Depreciation Method: The equipment is considered industrialized machinery and thus qualifies as seven-year MACRS property. In 5 years, the equipment can be sold for about 30% of its acquisition cost.

Assume that Dophical Corporation has hired you as the financial assistant to MAKE A Pro Forma Income Statement. Given the above information, make a Pro forma Income Statement and determine the free cash flows associated with the project, and apply / calculate the following investment technique on Excel.

A)the Net Present Value

B)the Profitability Index

C)the Internal Rate of Return

Use all of the information given / calculated in section one and via calculator calculate the questions given below:

a)Apply the Net Present Value and comment on your result.

b)Apply the Internal Rate of Return and comment on your result.

c)Apply the Payback Period and comment on your result. (Assume that preset time is 5 years)

d)Apply the Discounted Payback Period and comment on your result. (Assume that preset time is 5 years)

e)Apply the Profitability Index and comment on your result.

f)As a financial manager write up a detailed report and discuss whether the above project is acceptable or not. In your report also mention which technique is best and why?