Katy Company $($KO$)$ is considering to introduce a new smartphone on the market. KO spent $$1\mathrm{.}5$ million on Research and Development for this new smartphone, in addition, KO has spent a further $$250,000$ for a marketing study to determine the expected sales figures for the new smartphone. After all these expenses the management did not know whether they should go ahead or not. If KO takes this project, the management projects:

They can manufacture the new smartphone for $$210$ each in variable costs. Fixed costs for the operation are estimated to run $$5\mathrm{.}4$ million per year. The estimated sales volumes are $67,000,108,000,93,000,86,000,$ and $55,000$ per year for each of the next five years, respectively.

The unit price of the new smartphone will be $$525.$ The necessary equipment can be purchased for $$41\mathrm{.}5$ million and will be depreciated on a seven$-$year MACRS schedule, $(14\mathrm{.}29\%,24\mathrm{.}49\%,17\mathrm{.}49\%,12\mathrm{.}49\%,$ and $8\mathrm{.}93\%$ for the first $5$ years$).$

The salvage value of the equipment in five years will be $$5\mathrm{.}9$ million.

The net working capital requirement in each year for this project will be $20$ percent of sales for that year. Changes in NWC thus will occur first in Year $1$ with the first year's sales, and then in the following years.

Assume a $22$ percent corporate tax rate and a discount rate $($Cost of Capital$)$ of $12$ percent.

Answer the following questions, and show your work in Excel $($attached at the end of the exam$),$ just the answers will not get any credits.

What is the project's initial cash flow, CF$0?$

What are the project$$s operating cash flows, OCFs?

What is this project's net cash flow for each year?

What is the payback period of the project?

What is the NPV of the project?

What is the IRR of the project?

What is the MIRR of the project?