BADM 310 Final/Exam #3 FALL 2020 THERE ARE SIX PROBLEMS Post each problem to the correct dropbox. Clearly mark your answer. Do your best!!! #3 15 points. Simmonds Products has spent $258,000 (sunk cost) on research to develop lowfat imitation wine. The firm is planning to spend $300,000 on a machine to produce the new wine. Shipping cost of $60,000 and installation costs of $40,000 for the machine will be capitalized and depreciated via straight-line over 5-years. Inventory levels will increase by $30,000, account receivables will increase by $20,000, while account payables will increase by $15,000. The required rate of return is 14 percent, the tax rate is 35 percent and ROE is 18 percent. Earnings Before Interest and Taxes, EBIT, is expected to be $350,000 per year for years 1 through 7. a. Find the initial investment for the imitation lowfat wine project b. Find annual depreciation c. Find free cash flow (FCF) for year 3