Question 3 (30 marks) Board Gear Corp. (BG) is considering manufacturing a new model of paddleboard....

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Question 3 (30 marks) Board Gear Corp. (BG) is considering manufacturing a new model of paddleboard. This project would require an investment in equipment of $315,000 plus an additional $32,000 in working capital. The equipment is in the 20% CCA rate class, and BG has a tax rate of 25%. They believe the salvage value is $30,000. BG thinks they can sell 200 boards a year for 5 years, after which the working capital will be recovered. The boards will sell for $1,800 each. Fixed yearly manufacturing costs are $90,000, and variable costs are $600 per board. BG's cost of capital is 12%. Assume working capital is returned at the end of five years. Assume all cash flows occur at the end of the year. Required A. Calculate the required cash outlay for the investment. (5 marks) B. Calculate the cash flows from operations without considering the CCA tax savings. (5 marks) C. Calculate the present value of the cash flows from operations without considering the CCA tax savings. (10 marks) D. Calculate the CCA tax savings using the formula in your textbook on page 851. (8 marks) E. What is the final NPV of the project? Should they go ahead with the project? (2 marks) Question 3 (30 marks) Board Gear Corp. (BG) is considering manufacturing a new model of paddleboard. This project would require an investment in equipment of $315,000 plus an additional $32,000 in working capital. The equipment is in the 20% CCA rate class, and BG has a tax rate of 25%. They believe the salvage value is $30,000. BG thinks they can sell 200 boards a year for 5 years, after which the working capital will be recovered. The boards will sell for $1,800 each. Fixed yearly manufacturing costs are $90,000, and variable costs are $600 per board. BG's cost of capital is 12%. Assume working capital is returned at the end of five years. Assume all cash flows occur at the end of the year. Required A. Calculate the required cash outlay for the investment. (5 marks) B. Calculate the cash flows from operations without considering the CCA tax savings. (5 marks) C. Calculate the present value of the cash flows from operations without considering the CCA tax savings. (10 marks) D. Calculate the CCA tax savings using the formula in your textbook on page 851. (8 marks) E. What is the final NPV of the project? Should they go ahead with the project? (2 marks)