A Corporation manages the back-office functions of private medical practices. The company is analyzing a project to digitize the collection of medical records. Last year, the company spent $400,000 during a pilot project to prove that the digitization project was a viable idea, and now the company is evaluating whether to invest in it. Acquiring the necessary computer hardware and software to implement the project will cost $10,000,000. In addition, successful implementation will require the corporation to spend $1,300,000 to install and customize the software, plus $700,000 to purchase hand-held digital devices that medical staff will use to record medical data. Corporation will depreciate the system over 4 years to a net book value of zero. The corp expects an immediate increase in its Accounts Receivable balance of $200,000 as a result of the project. Because the purchases of paper forms and files will decline, the company also expects an immediate decrease in Accounts Payable of $100,000. The project will generate annual savings of $3,500,000 in Selling, General and Administrative expenses during each of the 4 years of the project. The corporation estimates that it could sell the entire system, including the handhelds, for $200,000 at the end of the project’s 4-year life.The entire digitization project is of average risk relative to the company’s other investments. The company intends to maintain a constant debt-to-equity ratio.The corp has 10 million common shares outstanding; the current price per share is $22.75. The Corporation beta is 0.80. Three years ago, the corporation issued $40 million of 10-year, 4% coupon bonds; the bonds were issued at their par value of $1,000 per bond. The bonds are rated AAA. They are currently priced at $1,006.074 per bond. Coupons are paid semi-annually. The corp has no other interest-bearing debt. The company has $4,500,000 in cash.The company expects the stock market to generate a 12% return in the coming year. US Treasury bills are expected to yield 0.20%. The company’s marginal and average tax rate is 21%. Develop a spreadsheet to answer the questions recorded below. Do not hard code values in excel calculations.

1. What is the initial investment required to implement the project?2. What are the future annual operating cash flows to be generated by the project?3. What is the future terminal (non-operating) cash flow that will result from the project?4. What is the expected rate of return on the corporation’s common stock, RS? 5. What is the pre-tax cost of the corporation's bonds, RD? 6. What is the corporation's Weighted Average Cost of Capital (WACC)? 7. What is the project’s Net Present Value (NPV)?8. What is the project’s Internal Rate of Return (IRR)?9. Should the corp implement the project? Why or why not? How much will the project earn (or lose)?10. What is corp’s expected stock price after implementing the project?