5. Salvage value: $1,000,000

Tax rate: 40%

WACC: 10%

A. Calculate Annual operating Cash flows for years 1-6 (Excel)

B.Calculate Terminal Cash Flow (Excel)

1. The cost of fixed assets Equipment: S200,000,000 Shipping and installation: $10,000,000 2. Changes in net operating working capital (NOWC) Inventories will rise by $2.500,000 Accounts receivable will increase by $4,000,000 Accounts payable will rise by $5,000,000 - The increase in NOWC will be recovered at the terminal of the project. 3. Effect on operations - New sales: 35,000,000 units/year @ S5/unit Variable cost: 70% of sales 4. Life of the project Economic life: 6 years Depreciable life: MACRS: depreciation rates are as following Year Depreciation rate 20% 3290 19.2% 11 .5290 11 .5290 5.76%