7) TCL is also considering an electronic manufacturing system. The treasurer has collected the following information about the proposed system. a. This project will last only 3 quarters. b. The company will have to purchase a piece of equipment to manufacture the electronic system. The equipment is manufactured in London. The equipment has an initial cost of 10,450,000. The equipment will be depreciated using a 3 year straight-line depreciation system. The equipment will have a before tax salvage value of $2,000,000. The current exchange rate is $0.475/ 1 (Forty-Seven and a half cents per British pound). d. The equipment will require an installation charge of 1,650,000 as well as a shipping charge of 146,300. There was a feasibility study complete to analyze the utility of this electronic system. The cost of the feasibility study was 1.2 million. The electronic system will also require a $1,400,000 (after taxes) technology upgrade. e. If the company goes ahead with the proposed product, it will have an effect on the company's net operating working capital. The net operating working capital will be ten percent (10%) of the sales they produce. f. TCL is in the 21 percent federal tax bracket. g. In the initial quarter sales are expected to be $5 million. Sales are expected to increase by 12% per quarter for the life of the project. The cost of goods sold (not including depreciation) are expected to equal 60 percent of sales revenue. h. Corporate headquarter assesses a branding fee for all projects. This fee is 5 percent of the sales produced that quarter. The firm will finance part of the equipment acquisition with debt. Thus, the Interest Expense is expected to be 15% of Sales. j. The treasurer assumes that the terminal growth rate is 8% per year. k. The cost of capital for the firm is based on the factors in the second page. However, the treasurer states that return for this project is 11.875% per year. The CFO assumes that all free cash flows will be reinvested at the cost of capital. The CFO would like you to evaluate this project by presenting the Net Present Value, Internal Rate of Return and the Modified Internal Rate of Return (NPV, IRR and MIRR). Please indicate where you would accept or reject this project based on your analysis. m. The Treasurer would like to see a quarterly pro-forma statement (Only 3 quarters). n. If you recommend that this project is to be accepted, then you are to suggest cost of capital for every financing option. If you recommend that this project be rejected, still provide the cost of capital for each security. (Please place your recommendations in the blanks below.) 0. The CFO would like you to suggest only one cost of preferred stock, one cost of common stock and one cost of debt (one each) from the different methods of analysis. i. cost of preferred stock cost of common stock cost of debt price for preferred stock price range for common stock price range for debt es) [ Focus 7) TCL is also considering an electronic manufacturing system. The treasurer has collected the following information about the proposed system. a. This project will last only 3 quarters. b. The company will have to purchase a piece of equipment to manufacture the electronic system. The equipment is manufactured in London. The equipment has an initial cost of 10,450,000. The equipment will be depreciated using a 3 year straight-line depreciation system. The equipment will have a before tax salvage value of $2,000,000. The current exchange rate is $0.475/ 1 (Forty-Seven and a half cents per British pound). d. The equipment will require an installation charge of 1,650,000 as well as a shipping charge of 146,300. There was a feasibility study complete to analyze the utility of this electronic system. The cost of the feasibility study was 1.2 million. The electronic system will also require a $1,400,000 (after taxes) technology upgrade. e. If the company goes ahead with the proposed product, it will have an effect on the company's net operating working capital. The net operating working capital will be ten percent (10%) of the sales they produce. f. TCL is in the 21 percent federal tax bracket. g. In the initial quarter sales are expected to be $5 million. Sales are expected to increase by 12% per quarter for the life of the project. The cost of goods sold (not including depreciation) are expected to equal 60 percent of sales revenue. h. Corporate headquarter assesses a branding fee for all projects. This fee is 5 percent of the sales produced that quarter. The firm will finance part of the equipment acquisition with debt. Thus, the Interest Expense is expected to be 15% of Sales. j. The treasurer assumes that the terminal growth rate is 8% per year. k. The cost of capital for the firm is based on the factors in the second page. However, the treasurer states that return for this project is 11.875% per year. The CFO assumes that all free cash flows will be reinvested at the cost of capital. The CFO would like you to evaluate this project by presenting the Net Present Value, Internal Rate of Return and the Modified Internal Rate of Return (NPV, IRR and MIRR). Please indicate where you would accept or reject this project based on your analysis. m. The Treasurer would like to see a quarterly pro-forma statement (Only 3 quarters). n. If you recommend that this project is to be accepted, then you are to suggest cost of capital for every financing option. If you recommend that this project be rejected, still provide the cost of capital for each security. (Please place your recommendations in the blanks below.) 0. The CFO would like you to suggest only one cost of preferred stock, one cost of common stock and one cost of debt (one each) from the different methods of analysis. i. cost of preferred stock cost of common stock cost of debt price for preferred stock price range for common stock price range for debt es) [ Focus