Hawaiian Coconut Milkshakes Inc. (HCM) considers the following project. They would like to expand and add a pineapple branch. The firm has paid $95,000 to a consultant in order to find out more about the available projects and possibilities. The marketing department has done extensive consumer research on the potential demand for the new shakes. The total costs for this research was $275,000. Based on this research, you are now considering opening up a Pineapple Juice division in the firm. The expected sales for this project are $1,600,000 per year for the next 2 years and $1,400,000 for the final (third) year. Accepting the project would mean that you could use an empty storage unit listed on the balance sheet. This storage unit consists of a very large building, for which you paid $50,000 in 1985. This storage unit has been fully depreciated and has a current market value of $90,000, which is expected to remain stable over time regardless of its use. Accepting the project would also mean that your current coconut shake sales are affected. In fact, you expect to see your current total after-tax cash flows (not revenues!) from coconut shakes (which are currently $1 million per year) increase immediately (as of t=0) by 14% (i.e., $1,140,000 yearly) because of the attention this project draws and they will continue at this higher level as long as the pineapple project is operational). These changes are predicted to be a direct effect of this new project. Manufacturing plant and equipment for this project (other than the storage unit) will cost $900,000 and will be depreciated according to a straight-line method over the life of the project. The market value of the manufacturing plant and equipment at the end of the project (t = 3) is $175,000 and is expected to level out at this price. Variable costs are projected at 75% of sales. There are no fixed costs associated with the project. Net working capital requirements are $55,000 at the start, and then respectively 12% and 18% of sales in t = 1, and t = 2. At t = 3 the NWC investments will be recovered. The required rate of return on this project is 18% and the corporate tax rate is 34%. [Select] $0; $506,000; $506,000; $473,000 $140,000; $366,000; $366,000; $193,000 -$230,000; $366,000; $366,000; $333,000 $140,000; $206,000; $206,000; $173,000 $140,000; $506,000; $506,000; $473,000 [Select] -$990,000; $0; $0; $205,500 -$900,000; $0; $0; $115,500 -$990,000; $0; $0; $265,000 -$959,400; $0; $0; $234,400 -$959,400; $0; $0; $174,900 [Select] -$55,000; -$137,000; -$96,000; $0 -$55,000; -$137,000; -$96,000; -$96,000 -$55,000; -$192,000; -$288,000; $288,000 -$55,000; -$137,000; -$96,000; $288,000 $55,000; $192,000; $288,000; -$288,000 [Select] The NPV will increase by $88,710.34 The NPV will drop by $88,710.34 The NPV will increase by $14,213.92 The NPV will drop by $14,213.92 The NPV will drop by $50,203.72 [Select] The NPV will decrease by $347,883.67 The NPV will may increase or decrease as we don't know if cutting the carbonated high-sugar content beverages would also allow the firm to sell off redundant assets. The NPV will decrease by $289,844.63 The NPV will decrease because of the lower operating cash flows in the next five year, but we need more information to calculate the exact number. The NPV is unaffected as the changes in cash flows are not relevant and incremental to the pineapple project. [Select] The cash flow in t=0 is higher because of the loan proceeds, but lower in the subsequent year because you pay off the loan and pay interest. The cash flows, particularly the operating cash flows, will be lower because of the interest payments. The cash flows, particularly the operating cash flows, will be lower because of the interest payments and the yearly loan payoff amounts. The cash flows are unaffected as financing consequences are captured in the discount rate in capital budgeting. The cash flows, particularly the operating cash flows, will be lower because of the interest payments, but higher because of the tax break these offer.