Its been 2 months since you took a position as an assistant financial analyst as Caledonia Products. Although your boss has been pleased with yourk, he is still a bit hesitant about unleashing you without superivision your next assignment involves both the calculation of the cas flows associated with a new investment under consideration and the evaluation of several mutually esclusive projects. given you lack of tenure at Caledonia, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at judging your understanding of the capital-budgeting process. The memorandum you received outlining your assignment follows. TO: The Assistant Financial Analyst FROM: Mr. V. Morrison, CEO, Caledonia Products RE: Cash Flow Analysis and Capital Rationing We are considering the introduction of a new product. Currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last five years and then, because this is somewhat of a fad project, to be terminated. The following information describes the new project: Cost of new plant and equipment: $7,900,000 Shipping and installation costs: $ 100,000 Unit sales: Year Units Sold 1 70,000 2 120,000 3 140,000 4 80,000 5 60,000 Sales price per unit: $300/unit in years 1