(Comprehensive problem) The Home Corporation, a firm in the 21% marginal tax bracket with a 13% required rate of return or cost of capital, is considering a new project. This project involves the introduction of a new palm oil strain. The project is expected to last 5 years and then, due to diminishing yields, it will be terminated. Given the following information, determine the free cash flows associated with the project, the projects net present value, the profitability index, and the internal rate of return. Apply the appropriate decision criteria.

Cost of new plant equipment: 15.200.000 dollar

Shipping and installation costs: 180.000 dollar

Unit sales: Year 1 75.000, year 2 118.000, year 3 118.000, year 4 85.000 and year 5 75.000.

Sales price per unit: 320 dollar/unit in years 1 through 4 and 230 dollar/unit in year 5.

Variable cost per unit: 150 dollar/unit.

Annual fixed costs: 680.000 dollar per year in years 1-5.

Working capital requirements: There will be an initial working-capital requirement of $175,000 just to get production started. For each year, the total investment in net working capital will equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 and 2, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5.

Depreciation method: Use the simplified straight-line method over 5 years. Assume that the plant and equipment to new palm oil strain will have no salvage value after 5 years.