please help with question #1. Thanks

A B C D E F G H I IK Details of McCormick Plant Proposal As you know from Project 4, McCormick & Company is considering a project that requires an initial investment of $350 million to build a new plant and purchase equipment. The investment will be depreciated as a modified accelerated cost recovery system (MACRS) seven-year class asset. The new plant will be built on some of the company's land, which has a current, after-tax market value of $14 million. You have been asked to refine your work to include the correct tax impact of depreciation, and the cash flow impact of working capital on the capital budget evaluation. The investment will be depreciated as a modified accelerated cost recovery system (MACRS) seven-year class asset. The correct depreciation table is included at the right. 75 16 17 18 19 20 The company will need to finance some of the cash to fund $17 million in receivables and $14 million in Inventory starting at year zero. The company expects vendors to give free credit on purchases of $15 million (accounts Payable). Add the net cash outflow for working capital to the cash outflow for the plant, equipment and land in year zero. The $17 million for receivables and the $14 million for Inventory are cash outflows. The $15 million for receivables is a cash inflow. Instructions Cost of Capital Capital Budgeting Average: 29.4806 Count: 31 Sun O Type here to search Assume that this net working capital is recovered as a cash inflow in year 21. The company still estimates revenues and expenses the same as it did in Project 4. See Table 2 at the right. Questions: 1. What will be the tax depreciation each year? Note: the total deprecation of tax purposes will still be $350 million if your calculations are correct. - .L .. . Instructions Cost of Capital Capital Budgeting Average: 29.4806 Count: 31 O Type here to search 15 Year 2 MN Table 2 A B Cash from Cash outflow, Taxable expenses in Depreciation in Income in $ Tax in Millions After tax Cash Flow In $Millions $Millions $Millions Millions 27.5% rate $Millions NPV $1,800 $1,728 $50.02 $21.99 $6.05 $65.95 $2.31 $1,900 $1,824 $85.72 -$9.72 -$2.67 $78.67 $2.76 $2,000 $1,920 $61.22 $18.79 $5.17 $74.83 $2.63 $2,100 $2,016 $43.72 $40.29 $11.08 $72.92 $2.56 $2,200 $2,112 $31.26 $56.75 $15.60 $72.40 $2.54 $2,300 $2,208 $31.22 $60.78 $16.71 $75.29 $2.64 $2,400 $2,304 $31.26 $64.75 $17.80 $78.20 $2.74 $2,500 $2,400 $15.61 $84.39 $23.21 $76.79 $2.69 $2,600 $2,496 $104.00 $28.60 $75.40 $2.65 $2,700 $2,592 $108.00 $29.70 $78.30 $2.75 $2,600 $2,496 $104.00 $28.60 $75.40 $2.65 $2,500 $2,400 $100.00 $27.50 $72.50 $2.54 $2,400 $2,304 $96.00 $26.40 $69.60 $2.44 $2,200 $2,112 $88.00 $24.20 $63.80 $2.24 $2,000 $1,920 $80.00 $22.00 $58.00 $2.04 $1,800 $1,728 $72.00 $19.80 $52.20 $1.83 Instructions Cost of Capital Capital Budgeting Average: 29.4806 16 Count: 31 Sum: 737.01 O Type here to search UZUUU 20 17 $1,800 $1,500 $1,200 $800 $400 $1,728 $1,440 $1,152 pou.u $72.00 $60.00 $48.00 $32.00 $16.00 PEL.UU $19.80 $16.50 $13.20 $8.80 $4.40 PDO.UU $52.20 $43.50 $34.80 $23.20 $27.60 NPV= $2.04 $1.83 $1.53 $1.22 $0.81 $0.97 $44.54 $768 19 20 $384 Table 3 A B Tax in $Millions Instructions Cost of Capital Capital Budgeting Average: 29.4806 Count: 31 Type here to search et e 8 L , e