PART 1 - DEVELOPMENT QUESTIONS (...../40) ABC Corporation is considering buying a new bottling machine for $120,000. The machine will be good for 4 years and will allow the company to process and sell an additional 60,000 bottles per year at $5 per bottle. Variable costs will be $3 per unit. Fixed costs will be $15,000 per year. This project will require an upfront investment in inventory of $20,000 that will be reclaimed at the end of the project. Depreciation will be straight line with no salvage. The tax rate is 34% and the required return is 20%. Computing cash flows - refresher Operating Cash Flow (OCF) EBIT + depreciation - taxes Cash Flow From Assets (CFFA) = OCF - net capital spending (NCS) - changes in NWC 1. 2. Find Proforma Statement of Comprehensive Income (10 points). Find Projected Capital Requirements (10 points). Find Projected Incremental Cash Flows (10 points). Assume the required return is 20% shall we accept this project? (10 points). 1. Consider a bond with a coupon rate of 10% and coupons paid annually. The par value is $5000 and the bond has 5 years to maturity. The yield to maturity is 12%. What is the value of the bond? (5 points)