KFC Inc.'s CFO, Louis, is evaluating a plan to produce high-protein chicken feed. The proposal would make use of an existing warehouse that is now leased to a nearby company. The warehouse's rental charge for the following year is $120,000, and after that, the rent is scheduled to rise at a rate of 4% per year, in line with inflation. In addition to using the warehouse, the proposal calls for a $1.25 million investment in a machine. They will also have to spend an extra $100,000 for transportation and installation. For tax reasons, the machine will be depreciated straight-line to 0 over a ten-year period. The proposal advises ending the project after five years, and Louis believes he can resell the machine for $450,000 in year five.

Sales of this new KFC are predicted to reach $4.2 million in the first year, and sales are expected to expand at a pace of 5% per year after that, slightly higher than inflation. Costs are estimated to account for 80% of revenue. Furthermore, Louis and his team estimate that this new feed will save $1.2 million in sales and $900,000 in costs over previous feed. For the next five years, these sales and cost decreases will remain constant.

Finally, the project necessitates a working capital investment equal to 10% of next year's sales. The net working capital investments will be recapitalized after five years. Louis is aware that the tax rate for KFC, Inc. is 35 percent, and that the KFC firm's needed return on these types of investments is 12 percent.

a) Calculate the after-tax operating cash flows for years 1 to 5.

b) Calculate the amount of net capital spending at year 0 and 5.

c) Calculate the net working capital for years 1 to 5

d) Calculate the total cash flows for years 0 to 5 and decide if the KFC run should accept or reject the project.