Decision and Risk Analysis

For a new process, the land was purchased for $$10$ million. The fixed capital investment, paid at the end of year $0,$ is $$165$ million. The working capital is $$15$ million, and the salvage value is $$15$ million. The estimated revenue from years $1$ through $10$ is $$70$ million$/$y$,$ and the estimated cost of manufacture over the same period is $$25$ million$/$y$.$ The internal hurdle rate $($interest rate$)$ is $14\%$ p$.$a$.,$ before taxes, and the taxation rate is $40\%.$

a$)$ Draw a discrete, nondiscounted $($i$.$e$.,$ the time value of money is not considered$)($before$-$tax$)$ cash flow diagram for this process.

b$)$ Determine the yearly depreciation schedule using the five$-$year MACRS method.

c$)$ Determine the after$-$tax profit for each year.

d$)$ Determine the after$-$tax cash flow for each year.

e$)$ Draw a discrete, discounted $($to year $0,$ i$.$e$.,$ the time value of money is considered$)$ cash flow diagram for this process.

f$)$ Draw a cumulative, discounted $($to year $0)$ cash flow diagram for this process.

g$)$ What is the present value $($year $0)$ of this process?