Part (A). Allied has a standard form that is used in the capital budgeting process. (See Table 1) Part of the table has been completed, but you must replace the blanks with the missing numbers ( marked with x ). Complete the table using the following steps: 1. Fill in the blanks under Year 0 for the initial investment outlays: Capital Expenditures (CAPEX) and change in Net Operating Working Capital (ANOWC). 2. Complete the table for unit sales, sales price, total revenues, and operating costs excluding depreciation. 3. Complete the depreciation data. 4. Complete the table down to after-tax operating income and then down to the project's operating cash flows, EBIT (1T)+ DEP. 5. Fill in the blanks under Year 4 for the terminal cash flows and complete the project free cash flow line: Alled Food products (revised) LLilievodpooug Gossimedtobe ofequalisisk to complete the tabeinsing no fonlowingstep and clange fo setooetat ny yor ung dabita (ANowos. depregation 3. connolletethe deprecrationgata! Table 1. Allied's Lemon juice Project 1. Investment outiays Eavipment bost Shipping andinstallation CAPEX increase in inventory Thereasein Accounts Payable ANOWC 4. Project operating Cash flows Unit sales Picesper timit Totalrevenues operatingucosts (wio deprn) Depreciation Total costs EBIT (Operating income) Taxes on operating income EBIT (1T)= After Tax operatingincome Add back depreciation EBIT 1T]+DEP 01. Project Termination cashifiows Salvage value Tax on salvage value After tax salvage value ANOWC = Recovery of HOWC Project free Cash plowis EBITA II+ DEP CAPEX. ANOWO Part (B) be accepted fingiaini Ant sates Priceporumit. Total revenues Operating costs. wo dopen) idepreciation Total costs. EBIT (operating (ncomol) Taxes on operating a ceme EBIT (1T)= Aftor Tax operating inoomo Add back depreclation EBIT (1T)+DEP IIf Project Termination cash Flows Salvage value Tax on salvage value After-tax salyage value ANOWC = Recovery of NOWC Project Free, Cash Flows = EBIT(1-T) + DEP = CAPEX ANOWC Part (B) Calculate the project's NRV, IRR, MIRR, and payback. Do these indicators suggest that the project should be accepted? Explain. Pant (C) 1. What is sensitivity analysis? 2. Perform a sensitivity analysis on the unit sales, salvagevalue, and w Acc for the project:- Assume that each of these variables deviates from its base-case or expected yalue by plus or ininus 10\%, 20%, and 30%. Calculate NPV for each case (21 NPV in totat. 7 NPV for change in unit: 5a. E. F NPV for change in salvage value; and 7 NPV for change in WACC), then draw a graph with thireedines (one for Unit Sales, one for Salvage Value, and one for Wace, all three lines in the: same graph). At the end, performa sensitivity analysis for the project (what you have seen from your Braph, what conclusion you can make?). 3. What is the primary weakness of sensitivity analysis? What are its primary advantages? samegraph jutherendipenfomas ansitivityanalysis forthe project lwhatyou have seenfrom Noungapny maticoncluspony you canmake?) 3 What theminan weakness fof sensitivity analyssp what are issprimanyadvantages? Pating. a sume thatinfationis expected to average Gog ger the nex fyearsand fat this expectationis retectedinthe WAegu Woreover nflationis expeoted to ingrease revenues and variable costs by this Same 8% Does in appear thatinfation mas been dealt with properly in the inifial analysis to this point?lif now what sinouldbe done and how would the tegaired adjustment affect the decision? Table : Alled s lemon jufoejpoject gonsiderng 5 : inflation Part (D) Assume that inflation is expected to average 8% over the next 4 years and that this expectation is reflected in the WACo. Moreover inflation is expected to increase revenues and yariable costs by this same 8.0. Does it appear that inflation has been dealt with properly in the initial analysis to this point? If not, what should be done and how would the required adjustment affect the decision? Table 2: Allieds Lemon Juice project considering s\% Infation Pant(D) Assume that inflation is expected to average sp over the next 4 years and that this expectation is reflected in the wace Moreover inflation is expected to increaserevenues and variable costs by this same 8\%. Does it appear that inflation has been dealtwith properly in the initial analysis to this point? le not what should be dane and how would the required a dustment affect the decision? Table 2. Alledss Lemon vuice project Considering 5% finfation part(E) Assume that you are confident about the estimates of all the variables that affect the cash fows except unit sales If product acceptanceis ppor, sales would be only 65,000 units a year, while a strong consumer response would produce sales of 240,000 units. In either case, cash costs would still amount to 40% ofrevenues You belleve that there is a 35% chance of poor acceptance, a 15% chance of excellent acceptance, and a 50% chance of average acceptance (the base case) 1. What is the worst-case Npy ? The best-case NPV? Hint: you should consider the 8% inflation in your calculation, i.e., part (E) is based on part (D). 2. Use the-worst-case, mostlikely case (or base-casel), and best-case NpVs with their probabilities of occurrence to find the fposects expected NPV, standard deviation, and coefficient of variation: Part (F). Assume that Allied's average project has a coeficient of variation (GV) in the range of 1.25 to 1.75 Would the lemonjuice project be classfied as higntrist, average risk, or how risk? What type of risk is being measured here? Hint: calculate cV using results from part. (E) then compare with the given range of 1.25 to 1.75. Part (G) Inrecent months Allied s group has begun to focus onfeat option analysis. What is realoption analysis? Pleasegive twolexamples pf projects with embedded real aptions