Part A Company J is considering a project with a 4-yearlifespan. The initial cash flow estimate is $125 million in the first year increasing by $125 million in each of the years 2 through 4. To begin the project, the company will need to invest $1 billion dollars. Company J would like to cover the initial investment amount with existing internal resources and thereby not borrow. As such it remains an all-equity firm. Theunleveredcost of its equity is 10%, similar to other firms in the industry sector. There will be no terminal value of significance at the end of year 4.

Using the domestic APV equation from Chapter 18 and noted below, construct a spreadsheet model to determine whether it makes sense for Company J to proceed with this project. Please review the exampleforan APV model that was introduced in the lecture when developing your answer.

Complete the following tables. Round your answers to the nearest dollar and do not enter the $ symbol in your answers.

Parameters SymbolValueInitial OutlayC₀ Unlevered Equity Cost % K_U%Years Project LifeTTerminal ValueTV_T

01234Initial OutlayCash FlowsDiscounted Cash Flows

APV = $

Based on the APV, would you recommend this project?