Company X is considering a new expansion project and the finance staff has received information summarized below.

• The project require Company X to purchase $1,000,000 of equipment in 2013 (t=0).
• Account Receivables will increase by $100,000 and accounts payable will rise by $60,000.
• The project will last for four years. The company forecasts that they will sell 2,000,000 units in 2014, 2,600,000 units in 2015, 2,000,000 units in 2016, and 2,000,000 units in 2017. Each unit will sell for $3.
• The fixed cost of producing the product is $1.5 million each year.
• The variable cost of producing each unit will rise from $1.010, 1.050, 1.060 and $1.080 from 2014 to 2017 respectively.
• The equipment will be depreciated under the MACRS system using the applicable rates of 33%, 45%, 15%, and 7% respectively
• When the project is completed in 2017 (t=4), the company expects that it will be able to salvage the equipment for $120,000, and it expects that it will fully recover the NWC.
• The estimated tax rate is 40%.

Based on the perceived risk, the projects WACC is estimated to be 12%

The main task is to evaluate the cash flows, analyze the results, and present recommendations. with aid of the following:

what is the total equipment cost

what is the net working capital

what is the investment amount at the start of the project

what is the depreciation amount and book value for each year

calculate after tax salvage value

compute the net income and operating cash flows during the project's life for each year(list all accounts and entries, and show all calculations)

create projected free cash flow schedule for project

calculate NPV using cash flow keys. list calculator keys and final answer

should the project be accepted or rejected based on NPV? explain

calculate IRR using cashflow keys

should the project be accepted or rejected based on IRR? explain

Please show excel calculations