28 / 58 184% RATE AND MANAGERIAL FINANCE + 162. Capital Budgeting: Pepsi Cola Company Ltd decides to sell 50,000 Cans of Pepsi per year at price of $4.00 per Can. It costs 2.50 per Can to make Pepsi, and the product has only a 5-year life. TE return on new product is required is 12 percent. The fixed cost for the project, including such things a rent on the production facility, will run 12,000 per year. An investment of a total of 90,000 i manufacturing equipment is needed, and this is expected to be 100 percent depreciated over the 5-yea life of the project. The project will require an initial investment in networking capital; the equipment i estimated to have a residual value of 20,000 at the end of the period. The production facility could have be rented out to generated 1,500 per year, but due to the production of the Pepsi this funds will not be realized. The firm is in a tax bracket of 35 percent. Required: a) Calculate the projected net cash flows/ b) Calculate the Net Present Value (NPV) c) Calculate the Profitability Index (P.1) d) Calculate the Internal Rate of Return (IRR) e Calculate the Payback Period, assuming the firm cutoff period is two years. f) State six ways to create positive NPV projects. g) Should the project be accepted or rejected, and why? 101 Sunni