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Nanaimo Corporation is in the shipping business. Currently their sole asset is 1 airplane it purchased 1 5 years ago for $ 5 0 0

Nanaimo Corporation is in the shipping business. Currently their sole asset is 1 airplane it purchased 15 years ago for $500 million. At the time of the airplane purchase the estimated useful life was 20 years. Straight line depreciation with no salvage value is the depreciation method. If they sell the airplane now, they will get $60 million. Net working capital presently is $17 million. The revenue stream for their business is $70 million per annum for the remaining life of their airplane along with operating costs of $30 million per year, interest expense of $4 million per year for the next 10 years with principal repayment at the end of $40 million. A defunct line of business continues to have allocated costs of $1 million each year for the next 3 years.
Nanaimo has been exploring the purchase of a more efficient jet. So far, they have incurred $2 million of search costs The jet they are financially analyzing to buy costs $800 million. Delivery and set up charges would be $5 million. The jet would generate sales of $130 million per year and operating costs of $25 million per year. The expected useful life of the jet is 10 years with a zero salvage value for depreciation purposes. The jet is expected to be sold at the end for $9 million. Net working capital (NWC) needs are forecasted to be $20 million. Disposal costs at the end are projected to be $4 million. The corporate income tax rate is 40%.
Estimate the cash flows of the proposed jet investment.

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