Firm Sales 1 2 3-... Revenues 1 ,00 1,040 1,060 1 ,1 00 Variable costs 30 312 318 330 Fixed costs 5 50 50 50 Wages 15 150 150 150 Project The company plans to launch a plus size garment line targeting new clients. In the previous weeks, the following information has been collected: a. Sales projections are 15% of rm sales, however it is expected that 5% come from current costumers (sales cannibalization). b. Production will be outsourced to different suppliers, as current production facilities are fully occupied. Variable costs will be 20% of the sales and fixed operating costs are expected to be 15 million per year. c. Annual budget for advertising campaigns will be 50 million in yearO and 1, and then always 20 millionfyear. d. The net working capital is estimated to be 40% of sales, and it is similar in the different garment lines. . e. 20% of the current designers and marketing staff will be allocated to the new plus size line. f. To give more identity to the brand, dedicated stores will be acquired. It is planned to spend from year 0 to 2, around 100 millionfyear in developing new points of sales. Depreciation will be at the constant rate of 4%. a. Sales projections are 15% ofrm sales, however it is expected that 5% come from current costumers (sales cannibalization). b. Production will be outsourced to different suppliers, as current production facilities are fully occupied. Variable costs will be 20% of the sales and fixed operating costs are expected to be 15 million per year. c. Annual budget for advertising campaigns will be 50 million in year 0 and 1, and then always 20 millionfyear. d. The net working capital is estimated to be 40% of sales, and it is similar in the different garment lines. . e. 20% of the current designers and marketing staff will be allocated to the new plus size line. f. To give more identity to the brand. dedicated stores will be acquired. It is planned to spend from year 0 to 2, around 100 million/year in developing new points of sales. Depreciation will be at the constant rate of 4%. Consider the additional information The tax rate is 30%. the discount rate is 10%. 3.1 What are the operating cash flows of the project? 3.2 What is the Terminal Value of the project? 3.3 Compute the NP'vr and the IRR. What is your recommendation regarding this project? 3.4 The sales department proposes to allocate some space in the current stores, and avoid expenses in new stores. However, the loss is sales will be 10% and not 5%. What would be the impact on the NP'vr of this alternative? Is this a better proposition for shareholders