FINANCIAL ANALYSIS TABLE 2. INFLATON \& PRICE INDEX Inflation Price index TABLE 2. REvENUE (CAD) \begin{tabular}{l} Increased proouction \\ Labor saving \\ TABLE 3. OPERATING \\ \hline Operating Expenses \\ \hline Material \\ Labour \\ Engery \\ Others \\ \hline Total Operating Costs \\ \hline \end{tabular} TABLE 4. BOOK VALUES (CAD) Land Lailding Machines BOOK Value of Assats TABLE S. DEPRECIATION FOR TAX PURPOSES (CAD) Land Builleling Machir FINANCIAL ANALYSIS TABLE 2. INFLATON \& PRICE INDEX Inflation Price index TABLE 2. REvENUE (CAD) \begin{tabular}{l} Increased proouction \\ Labor saving \\ TABLE 3. OPERATING \\ \hline Operating Expenses \\ \hline Material \\ Labour \\ Engery \\ Others \\ \hline Total Operating Costs \\ \hline \end{tabular} TABLE 4. BOOK VALUES (CAD) Land Lailding Machines BOOK Value of Assats TABLE S. DEPRECIATION FOR TAX PURPOSES (CAD) Land Builleling Machir elopment Economics Integrated Cash flow and Income Generating Property Practice stions. Langley Manufacturing Company is considering purchasing a new computer-controlled milling machine to produce a custom-ordered metal product. The following are the relevant financial data related to the project: - The machine costs $150,000 with installation, site preparation, and wiring costs of $20,000. The machine has CCA rate of 30% per year and salvage value at the end of 10 years would be $30,000. The machine also needs special jigs and dies, which will cost $20,000 and will last five years. The special jigs and dies are worth only $2,500 as scrap metal and have a CCA rate of 100%. - Purchase a 8,000 m2 warehouse at a cost of $360,000. For tax depreciation purposes, the warehouse cost of $360,000 is divided into $240,000 for the building with a CCA rate of 4% and $120,000 for land. At current market trend, the building will appreciate by 3.5% per year, but the value of the land will have appreciated by 10% per year. - Revenue from increased production is expected to be $160,000 per year and labour saving $60,000 per year. The additional annual production costs are estimated as follows: materials, $45,000; labour, $65,000; energy $12,500; and other miscellaneous costs, $12,500. - For the analysis, a 10-year life will be used. LMC has a marginal tax rate of 26% and a MARR of 15%. Capital gains will be taxed at 13%. - Debt ratio 40% (equity to debt is 60% and 40% ) - Cost of capital 5\% - Average inflation is estimated at 2.5% per year Required: a. Prepare integrated cash flow for the project. Consider loan is to be repaid in equal annual installments. b. Does the project generate sufficient annual net cash flows to pay back its loan principal and interest payments? Should the bank be interested in financing this project? c. What is the nominal and real net present value (NPV) and Internal rate of return (IRR) of the proposed project? Discuss your result. Assume holding period of 10 years. d. Should the investment be made? FINANCIAL ANALYSIS TABLE 2. INFLATON \& PRICE INDEX Inflation Price index TABLE 2. REvENUE (CAD) \begin{tabular}{l} Increased proouction \\ Labor saving \\ TABLE 3. OPERATING \\ \hline Operating Expenses \\ \hline Material \\ Labour \\ Engery \\ Others \\ \hline Total Operating Costs \\ \hline \end{tabular} TABLE 4. BOOK VALUES (CAD) Land Lailding Machines BOOK Value of Assats TABLE S. DEPRECIATION FOR TAX PURPOSES (CAD) Land Builleling Machir FINANCIAL ANALYSIS TABLE 2. INFLATON \& PRICE INDEX Inflation Price index TABLE 2. REvENUE (CAD) \begin{tabular}{l} Increased proouction \\ Labor saving \\ TABLE 3. OPERATING \\ \hline Operating Expenses \\ \hline Material \\ Labour \\ Engery \\ Others \\ \hline Total Operating Costs \\ \hline \end{tabular} TABLE 4. BOOK VALUES (CAD) Land Lailding Machines BOOK Value of Assats TABLE S. DEPRECIATION FOR TAX PURPOSES (CAD) Land Builleling Machir elopment Economics Integrated Cash flow and Income Generating Property Practice stions. Langley Manufacturing Company is considering purchasing a new computer-controlled milling machine to produce a custom-ordered metal product. The following are the relevant financial data related to the project: - The machine costs $150,000 with installation, site preparation, and wiring costs of $20,000. The machine has CCA rate of 30% per year and salvage value at the end of 10 years would be $30,000. The machine also needs special jigs and dies, which will cost $20,000 and will last five years. The special jigs and dies are worth only $2,500 as scrap metal and have a CCA rate of 100%. - Purchase a 8,000 m2 warehouse at a cost of $360,000. For tax depreciation purposes, the warehouse cost of $360,000 is divided into $240,000 for the building with a CCA rate of 4% and $120,000 for land. At current market trend, the building will appreciate by 3.5% per year, but the value of the land will have appreciated by 10% per year. - Revenue from increased production is expected to be $160,000 per year and labour saving $60,000 per year. The additional annual production costs are estimated as follows: materials, $45,000; labour, $65,000; energy $12,500; and other miscellaneous costs, $12,500. - For the analysis, a 10-year life will be used. LMC has a marginal tax rate of 26% and a MARR of 15%. Capital gains will be taxed at 13%. - Debt ratio 40% (equity to debt is 60% and 40% ) - Cost of capital 5\% - Average inflation is estimated at 2.5% per year Required: a. Prepare integrated cash flow for the project. Consider loan is to be repaid in equal annual installments. b. Does the project generate sufficient annual net cash flows to pay back its loan principal and interest payments? Should the bank be interested in financing this project? c. What is the nominal and real net present value (NPV) and Internal rate of return (IRR) of the proposed project? Discuss your result. Assume holding period of 10 years. d. Should the investment be made