a) Use the data provided here to estimate annual relevant free cash flow amounts throughout the economic life of a capital budgeting project.

Taurus Inc. wants to evaluate the acquisition of an equipment. The equipments basic acquisition price is $100 million, and would cost another $10 million for shipping & handling, plus another $5 million to install & modify it for use by the firm at the beginning. Taurus plans to use this equipment for 4 years, and then at the end of Year 4, the equipment is expected to be salvaged for $20 million of market value. Per US tax rules about depreciation treatment, this equipment is categorized as an MACRS 3-year class asset --- that is, 33%, 45%, 15% and 7% to be depreciated for Year 1, 2, 3 and 4, respectively.

With this 4-year equipment investment project, Taurus will also be subject to such changes:

Produce 30,000 units of products each year, from Year 1 to Year 4; Each product unit sells for the price of $1,200 at Year 1, thereafter growing 4% per year in real terms; Each product unit costs $800 to produce at Year 1, thereafter growing 3% per year in real terms; The side effects and opportunity costs of this equipment are negligible to Taurus; Each year, Taurus needs to invest to prepare a net operating working capital beforehand, amounting to 10% of revenue projected for the year that follows; The applicable federal-plus-state tax rate for future years is 24%.

(b) Assuming that Taurus's nominal WACC (observed from open market) = 7.50% per year, while the annual inflation rate = 3,02% per year. Compute (in real terms) the NPV, IRR, MIRR, Payback period, and EAA of this project. Decide whether or not this project is financially worth investing upon.

C) What if Deere Co. plans to acquire the equipment? What would be your suggestions?