$1.$ Katarina Jones lives in Burwood NSW and has decided to expand her home bakery business by building a new factory in Burwood NSW$.$ Last month she flew to Perth to visit a former employee who is now a business consultant to get some ideas. She flew up and back on the same day and the total cost including uber and airfares was $$1500.$ The consultant that she visited charged $$5,000$ for his report and he advised her to use her existing investment property to build a new bakery. The investment property is currently leased to Bakers Delight for $$5000$ a month. The cost of the fit out of the new premises will be $$500,000$ and equipment will be $$250,000.$ The accountant insists that depreciation should be charged at straight line over $20$ years. The ATO rules however specify that fit outs must be depreciated over $20$ years and equipment over $25$ years straight line. The new premises will require a $$100,000$ investment in working capital.

$2.$ Previously they had rented a factory in Greenacre for a cost of $$2000$ a month. Katarina expects that revenues from the new factor will see revenues increase from $$8000$ to $$25000$ per month. Costs will decrease from $$10,000$ to $$8,000$ per month.

$3.$ All staff will be retained on their same conditions except that Marty Collins will no longer be needed. He will made redundant, thus saving $$100,000$ per year. In view of his years of faithful service Katarina will pay him a $$500,000$ redundancy in year $0$ if the project goes ahead. This is tax deductible.

$4.$ The tax rate is $30\%.$

$5.$ Jones will require a $$500,000$ Interest Only loan from Westpac at $10\%$ per annum $($$$50,000$ interest per year$).$

$6.$ The project is expected to last $10$ years.

$7.$ All cash flows are given in real terms. The nominal interest rate for projects such as this are $10\%$ and expected inflation is $3\mathrm{.}5\%.$

$8.$ The only equipment owned by Jones at the old premises was purchased $8$ years ago for $$350,000$ and has a useful life of $10$ years according to the ATO. It is currently being depreciated for tax purposes over $10$ years straight line. If the project goes ahead, she expects to be able to sell the equipment for $$120,000.$

$9.$ At the end of the project the fit out will be worthless and the equipment $$200,000.$

Calculate the Free Cash Flows for Period $0.$ Show all Workings.