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( Comprehensive problem calculating project cash flows, NPV , PI , and IRR ) Traid Winds Corporation, a firm in the 3 2 percent marginal

(Comprehensive problemcalculating project cash flows, NPV, PI, and IRR)Traid Winds Corporation, a firm in the 32 percent marginal tax bracket with a required rate of return or discount rate of 11percent, is considering a new project. This project involves the introduction of a new product. The project is expected to last 5 years and then, because this is somewhat of a fad product, it will be terminated. Given the following information, Use the simplified straight-line method over 5 years. It is assumed that the plant and equipment will have no salvage value after 5 years. $14,200,000
Shipping and installation costs: $210,000
Unit sales:
Year Units Sold
165,000
2115,000
3115,000
475,000
565,000
Sales price per unit: $290/unit in years 1 through 4, $240/unit in year 5
Variable cost per unit: $180/unit
Annual fixed costs: $650,000
Working-capital requirements: There will be an initial working capital requirement of $160,000 to get production started. For each year, the total investment in net working capital will be equal to 8 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5.
The depreciation method: Use the simplified straight-line method over 5 years. It is assumed that the plant and equipment will have no salvage value after 5 years. determine the free cash flows associated with the project, the project's net present value, the profitability index, and the internal rate of return. Apply the appropriate decision criteria.

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