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HALF OF MY GRADE!! SOS!!! Wills Winery is considering opening a winery near campus. To open the winery, they must purchase $270 in equipment. Shipping

HALF OF MY GRADE!! SOS!!!

Wills Winery is considering opening a winery near campus. To open the winery, they must purchase $270 in equipment. Shipping of the equipment will cost $60 and installation of the equipment will be $50. Wills Winery will lease a building for $335 per year. The building will need modifications costing $100, but these will be paid by the landlord. The modifications and equipment are depreciated using the 5-year MACRS schedule. Wills Winery will operate the winery for four years, and then expects to sell the winery to an investor for $600 plus any working capital. The firm will have some one-time expenses in year 1 of $170, primarily licenses and legal fees. To operate the winery, Wills Winery will need an increase in Inventory of $27, an increase of Accounts Receivables of $14, and will have an increase in Accounts Payable of $19. Working capital will be recovered when we sell the winery. Annual sales will begin at $500, the increase at $700 per year. Thus year 2 sales are $1200, year 3 are $1900 and year 4 are $2600. Cost of Goods Sold (excluding overhead, depreciation, and lease payments) are 50% of annual sales. To operate the company, executives and administrators must be hired, at an annual fixed cost of $450. Wills has an agreement for a 3-year 6% amortized Small Business Administration Loan to finance part of the project. The firm needs new equity investors to fund the expansion and Wills Winery has only been able to find one equity investor. Both SBA and this equity investor requires that the firm have audited financial statements. The outside investor gets to choose the auditor and the auditor would cost the company $20 per year. The firms tax rate is 30%. The cost of capital is 13%. What are the Initial Cash Flows in Year 0? What are the Operating Cash Flows in Year 2? What are the Terminal Cash Flows in Year 4? (I want only Terminal Cash Flows, not operating cash flows in year 4) If you complete this in a spreadsheet, you can copy/paste your answer into the answer area.

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