It's been two months since you took a position as an assistant financial analyst at NZ Products Ltd. Your boss has been pleased with your work and has asked you to evaluate the introduction of a new product under consideration. The new assignment involves the calculation of the cash flows associated with the new investment, providing a recommendation and responding to a number of questions about the investment process. Since the new product has a brief life cycle that rises quickly in popularity but then declines just as quickly, the project is expected to last only 5 years before it is terminated. New equipment required for the new product will cost $12,500,000 and incur about $175,000 in shipping and installation costs. Estimated sales in number of units are 65,200 on average in years 1 to 5. The sales price is expected to be $290 per unit in years 1 to 4 and $210 per unit in year 5 due to lower demand. The variable cost is estimated to be $195 per unit and annual fixed costs $190,000. In addition, there will be an initial working capital requirement of $150,000 to get the production started. You should use the straight-line depreciation method over 5 years with zero salvage value after 5 years. NZ Products Ltd has a marginal tax rate of 28% and a cost of capital of 16%. Required: a. b. c. What is the project's initial outlay? (2 marks) Calculate the free cash flows in year 1 through year 5. Show your workings. (8 marks) What is the net present value for this project? Show your workings. (5 marks) What is the payback period? Show your workings. (3 marks) Formulate a recommendation whether the project should be accepted, including why or why not. (2 marks) d. e. TOTAL: 20 MARKS