Nion, an electronic car manufacturer is considering investing in a new project that manufactures medium size electronic trucks. You have received the following information relating to the project:

• The project will run for five years;
• Annual sales are expected to be $40 million in the first year, and will grow at a rate of 10% until the end of the life of the project;
• Cost of goods sold is expected to be 80% of the sales.
• Operating expenses are expected to be $2 million per year;
• There will be upfront marketing and R&D expenses of $4 million;
• Initial equipment costs of $6 million. The equipment will be depreciated via the straight-line method over 6 years to a book value of zero. However, at the end of the project, the equipment will be sold for $500,000;
• Nions debt cost of capital is 9%, and the cost of equity capital is 12%; and,
• Nion pays a corporate tax rate of 30%.

In addition, no net working capital is required for the project. Assume that the project has the same risk as to the firm. Nion has $60 million in cash, $600 million in equity, and $360 million in debt.

A) Calculate the projected free cash flows of the new project Nion is considering.

B) Assuming Nion wishes to constantly maintain the current leverage ratio; calculate the weighted average cost of capital.

C) Calculate the levered value of the project.

D) What are the debt capacities at the end of each year?

E) What are the interests paid at the end of each year?

F) What is the present value of the interest tax shield?

G) Calculate the projects value using APV method.

H) What is the projects NPV? Should Nion invest in the new project?