Since East Coast Yachts is producing at full capacity, Larissa has decided to have Dan examine the feasibility of a new manufacturing plant. This expansion would represent a major capital outlay for the company. A preliminary analysis of the project has been conducted at a cost of $$1\mathrm{.}2$ million. This analysis determined that the new plant will require an immediate outlay of $$55$ million and an additional outlay of $$30$ million in one year. The company has received a special tax dispensation that will allow the building and equipment to be depreciated on a $20-$year MACRS schedule.

Because of the time necessary to build the new plant, no sales will be possible for the next year. Two years from now, the company will have partial$-$year sales of $$18$ million. Sales in the following four years will be $$27$ million, $$35$ million, $$39$ million, and $$43$ million. Because the new plant will be more efficient than East Coast Yachts$$ current manufacturing facilities, variable costs are expected to be $60$ percent of sales, and fixed costs will be $$2\mathrm{.}5$ million per year. The new plant will also require net working capital amounting to $8$ percent of sales for the next year.

Dan realizes that sales from the new plant will continue into the indefinite future. Because of this, he believes the cash flows after Year $5$ will continue to grow at $3$ percent indefinitely. The company$$s tax rate is $40$ percent and the required return is $11$ percent.

Answer the following:

$1.$ analyze the financial viability of the new plant

$2.$ calculate the profitability index

$3.$ Calculate the NPV known as net present value

Calculate the IRR $,$ also known as internal rate of return.

Also, Larissa has instructed Dan to disregard the value of the land that the new plant will require. East Coast Yachts already owns it$,$ and, as a practical matter, it will simply go unused indefinitely.

$5.$ discuss this issue in his report.