Could someone please help me with this, ive been doing it for sometime but I keep on getting it wrong. Im not sure what im doing wrong. It would be great if someone could do it completely and explain each answere, as im not sure if im messing up on the first part which gets me the rest wrong or if is in the middle or end.

CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were recently hired as assistant to the director of capital budgeting and you must evaluate the new project. The lemon juice would be produced in an unused building adjacent to Allicd's Fort Myers plant; Allied owns the building, which is fully depreciated. The required equipment would cost $200,000, plus an additional $40,000 for shipping and installation. In addition, inventories would rise by $25,000, while accounts payable would increase by $5,000. All of these costs would be incurred at t=0. By a special ruling, the machinery could be depreciated under the MACRS system as 3-year property. The applicable depreciation rates are 33%, 45%,15%, and 7%. The project is expected to operate for 4 years, at which time it will be terminated. The cash inflows are . assumed to begin 1 year after the project is undertaken, or at t=1, and to continue out to t=4. At the end of the project's life (t=4), the equipment is expected to have a salvage value of $25,000. Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00 per unit. Cash operating costs for the project (total operating costs less depreciation) are expected to total 60% of dollar sales. Allied's tax rate is 40%, and its WACC is 10%. Tentatively, the lemon juice project is assumed to be of equal risk to Allied's other assets. You have been asked to evaluate the project and to make a recommendation as to whether It should be *: accepted or rejected. To guide you in your analysis, your boss gave you the following set of tasks/questions: a. Allied has a standard form that is used in the capital budgeting process. (See Table IC12-1.) Part of the table has been completed, but you must replace the blanks with the missing numbers. Complete the table using the following steps: (1) Fill in the blanks under Year 0 for the initial investment outlay. (2) Complete the table for unit sales, sales price, total revenues, and operating costs excluding depreciation. (3) Complete the depreciation data. (4) Complete the table down to after-tax operating income and then down to the project's operating cash flows. (5) Fill in the blanks under Year 4 for the terminal cash flows and complete the project cash flow line. Discuss working capital. What would have happened if the machinery were sold for less than its book value? b. (1) Allied uses debt in its capital structure, so some of the money used to finance the project will be debt. Given this fact, should the projected cash flows be revised to show projected interest charges? Explain. (2) Suppase you lcamed that Allied had spent $50,000 to renovate the building last year, expensing these costs. Should this cost be reflected in the analysis? Explain. (3) Suppose you leamed that Allied could lease its building to another party and eam $25,000 per year Should that fact be reflected in the analysis? If so, how? (4) Assume that the lemon juice project would take profitable sales away from Allied's fresh orange juic: business. Should that fact be reflected in your analysis? If so, how? c. Disregard all the assumptions from Part b and assume there is no alternative use for the building over the next 4 years. Now calculate the project's NPV, IRR. MIRR, and payback. Do these indicators suggest that the project should be accepted? Explain. d. If this project had been a replacement rather than an expansion project, how would the analysis lane changed? Think about the changes that would have to occur in the cash flow table. e. (1) What three levels, or types, of project risk are nomally considered? (2) Which type is most relevant? (3) Which type is easiest to measure? (4) Are the three types of risk generally highly correlated? f. (1) What is sensitivity analysis? (2) How would you perform-a sensitivity analysis on the unit sales, salvage value, and WACC project? Assume that each of these variables deviates from its base-case, or expected, value by plis: minus 10%,20%, and 30%. Explain how you would calculate the NPV, IRR, MIRR, and paybuck for case; but don't do the analysis unless your instructor asks you to. (3) What is the primary weakness of sensitivity analysis? What are its primary advantages? Work out quantitative answers to the remaining questions only if your instructor asks you to. Abo note will take a long time to do the calculations unless you are using an Excl model. g. Assume that inflation is expected to average 5% over the next 4 years and that this expectation is reficthe WACC. Moreover, inflation is expected to increase revenues and variable costs by this same 5 appear that inflation has been dealt with properly in the initial analysis to this point? If not, what aht done and how would the required adjustment affect the decision? h. The expected cash flows, considering inflation (in thousands of dollars), are given in Table IC12-2, Allied's WACC is 10\%. Assume that you are confident about the estimates of all the variables that affect the cash flows except unit sales. If product acreptance is poor, sules would be only 75,000 unifs a year, while a strong consumer response would produce sales of 125,000 unise in either case, cash cosis would still amount to 60% of revenuce. You betieve that there is a 25% chance of poor acreptance, a 25% chance of excellent acceptance, and a 50% chance of average acoeptance (the base case). Prowide numbers only if you are using a computer model. (1) What is the worst -case NPV? the best-case NPV? (2) Use the worst case, most likely case (or bsse-case), and best-case NPVs with their probabilities of occurrence to find the projoct's expected NPV, standard deviation, and coefficient of variation 1. Assume that Nilied's average project has a coefficient of variation (CV) in the range of 1.25 to 1.75 . Would the lemon juice project be classified as high risk, average risk, or low risk? What type of risk is being measured here? 1. Based on common sense, how highly correlated do you think the project would be with the firm's other assets? (Give a correlation coefficient or range of coefficients based on your judgment.) k. How would the correlation coefficient and the previously calculated combine to affect the project's contrbution to corporate, or within-firm, risk? Explain. 1. Based on your judgment, what do you think the project's correlation coefficient would be with respect to the general economy and thus with retums on "the market"? How would comdation with the econemy affect the project's market risk? m. Allied typically adds or subtracts 3% to its WACC to adjust for riak. After adjusting for risk, should the lemon juice project be accepted? Should any subjective risk factors be considered before the final decieion is made? Explain