(Determining relevant cash flows) Landaruisers Plus (LP) has operated an online retal store seling off-road ruck parts durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 198 As the name implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its 2 meant that FJ40 owners depended more and more on re-manufactured parts to keep their beloved off-road vehicles nunning. More and more FJ40 owners are replacing the original inline six-cyinder engines with a modem American-built engine. The engine replacement requires mating the new engine with the Toyota drive train LP's owners had been offering engine adaptor kits for some time but have recenty decided to begin building their own units. To make the adaptor kits the fim would need to invest in a variety of machine tools costing a total of $650,000. LP's management estimates that they will be able to borow $340,000 from the fiem's bank and pay 8 percent interest. The remaining funds would have to be supplied by LP's owners The firm estimates that they will be able to sell 1,000 units a year for $1,400 each. The units would cost $1,000 each in cash expenses to produce (his does not include depreciation expense of $65,000 per year or interest expense of $27,200) Ater all expenses, the fim expects eamings before interest and taxes of $335,000. The firm pays taxes equal to 33 percent, which results in net inoome of $197,250 per year over the 10-year expected ife of the equipment a. What is the annual free cash flow LP should expect to receive from the investment in year 1 assuming that it does not require any ofther investments in either capital equipment or working capital and the equipment is depreciated over a 10-year life to a zero salvage and book value? How should the financing cost associated with the $340,000 loan be incorporated into the analysis of cash flow? b. if the fim's required rate of retum for its investments is 11 percent and the investment has a 10-year expected e, what is the anticipated NPV of the investment? be incorporated a. The financing oost associated with the $340,000 loan into the analysis of cash fow. (Select from the drop-down menu) Cick to select your answeris and then click Check Answer parts remairing Clear All Final Check MacBook Pro esc % & 6 7 3 4 5 P W E R Y U J L K A S D F O