1. The project requires a new machine that costs $300K (installation included) and is expected to stop working properly in 5 years 2. CORP intends to depreciate the machine linearly over the next five years and expects nobody will be interested in buying the machine, especially given that it costs $5K after tax to hire workers to dispose the machine 3. The project will be financed with 70% leverage. The project's loan is entirely collateralized by the project's assets (i.e., no default risk) and pays an interest rate of 4% 4. The machine will produce 2,000 pillow units per month, all of which can be easily sold in the market 5. Each pillow unit can be sold for $40 and costs $30, with $10 of the unit cost corresponding to factory workers' salaries 6. The warehouse in which CORP currently stores its pillow units is large enough to accommodate the new units from the project. The warehouse has been rented for $30K per year and will continue to be this year and in the next 5 years, with this cost being accounted for outside CORP's COGS 7. To keep its brand in the mind of consumers, CORP has kept internet adds that expose the different types of pillows the company sells. CORP intends to keep these adds running this year and over the next 5 years at an annual cost of 20K 8. The logistics of the business requires CORP to keep an inventory of 2 months worth of COGS 9. CORP takes, on average, 3 months to pay its production-related bills (except for the warehouse rental) and receives the cash from its sales, on average, 4 months after the sales Given all the information above, you decided to check whether the investment analysis provided by this new group of analysts is correct. Please, go over the excel file "Final Exam" and correct all the mistakes you find. Highlight the corrections in yellow and add a comment (right click/New note) for each mistake to briefly explain the problem with the original calculation.Modeling Question CORP is a public firm that sells several different types of ergonomic pillows and has been facing excess demand. Consequently, CORP is considering whether to take on a new project to expand its production capacity. The CFO requested a capital budgeting analysis and you decided to calculate the project's NPV, IRR, and Payback Period. You assigned the task to a new group of analysts in your team and they produced the analysis in the excel file "Final Exam". To design their investment analysis, your team collected some information on CORP and two of its competitors. Using all of that information, they reached the following estimates (which you can assume are correct): Information Notation CORP COMPETITOR 1 COMPETITOR 2 Average Tax Rate = Marginal Tax Rate 30% 20% 25% Leverage D/V 40% 50% 60% Firm's Average Yield on Debt Contracts y 7% 8% 7% Firm's Average Maturity on Debt Contracts 2 years 6 years 4 years Debt Credit Rating Rating Ba B Baa Equity Beta BE 1.2 1.0 1.1 Risk-free Rate If 4% 4% 4% Market Risk Premium Erm - rf] 7% 7% 7% They believe (and you agree) that the two competitors are not perfectly comparable to CORP. but they are the best comparables to CORP one can find among public firms. The new group also relied on other assumptions, which they made based on the information they collected from different departments of the firm. The assumptions are as follows (and you can assume they are reasonable)