IBM is considering a new expansion project and the finance staff has received information summarized below. The project require IBM to purchase $900,000 of equipment in 2013 (=0). Account Receivables will increase by $175,000 and accounts payable will rise by $75,000. The project will last for four years. The company forecasts that they will sell 2,685,000 units in 2014, 2,600,000 units in 2015, 2,525,000 units in 2016, and 2,450,000 units in 2017. Each unit will sell for $2. The fixed cost of producing the product is $2 million each year. The variable cost of producing each unit will rise from $1.018, 1.078, 1.046 and $1.221 from 2013 to 2017 respectively. The equipment will be depreciated under the MACRS system using the applicable rates of 33%, 45%, 15%, and 7% respectively When the project is completed in 2017 (-4), the company expects that it will be able to salvage the equipment for $100,000, and it expects that it will fully recover the NWC. The estimated tax rate is 40%. Based on the perceived risk, the project's WACC is estimated to be 10%. To start, the manager will like you to calculate the projected the net income for four years of the project by answering the following questions: 1. What is the equipment cost? 2. What is the depreciation amount for each year? Create a table on Canvas with 5 columns List accounts in this Year 1 column. 2 3 4 Depreciation is the equipment cost times the MACRS applicable rates of 33%, 45%, 15%, and 7% respectively for each year. 3. Compute the Net Income during the project's life for each year. Use table on Canvas with 5 columns Note: a. You must list all the accounts and entries in order to earn full credit. No credit will be awarded for merely listing numbers without the associated accounts. b. Show the work in order to full credit List accounts in this Year 1 column. 2 3 4 4. Calculate the Operating Cash Flows (OCF) for each year. Use table on Canvas with 5 columns List accounts in this Year 1 column. 2 3 4 Operating Cash Flows (OCF) = Net Income + Depreciation Note: This formula is used only if interest is excluded in getting the net income