Please help with question 4. I am attaching table 2 and 3. If something is incorrect please help. Thank You!!

The following questions will be used to estimate risk. Please use Table 3 to calculate cash flow. 4. The controller is worried about tax increases and estimates that the tax rate with be raised to 50% (federal and Maryland state) in year 4. Also there is a concern that expenses are understated. He asks, "What would happen to the NPV calculation if the cash tax expenses come in 2% higher than estimated and the tax rate increases to 50% in year 4?" This will allow a subjective evaluation of the project risk. Calculate a new cash flow time line with cash expenses 10% higher than those in Table 2 and with a 50% tax rate. Use Table 3 5. What would be the net nresent value NPV in this "worst race" rash flow? What will be the IRR? Instructions Cost of Capital Capital Budgeting O Type here to search Et et 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. Year 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. 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. 121 Table 2 Cash from Cash outflow, Taxable Revenue in expenses in Depreciation in Income in $ Tax in Millions After tax Cash Flow In $Millions SMillions Millions Millions 27.5% rate SMillions 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 16 $1,800 $1,728 $72.00 $19.80 $52.20 $1.83 17 $1,500 $1,440 $60.00 $16.50 $43.50 $1.53 18 $1,200 $1,152 $48.00 $13.20 $34.80 $1.22 S768 $32.00 $8.801 $23.2010.81 Instructions Cost of Capital Capital Budgeting Average: 294806 14 157 191 5800 Count: 3 U V 3 Year $2,350.08 WNLOCO OU W N S T $400 $384 $16.00 $4.40 $27.60 $0.97 Table 3 NPV- $44.54 A B Tax in Millions Cash from Cash outflow, Taxable 27.5% rate in Revenue in expenses in Depreciation in Income in $ years 1, 2, 3 and After tax Cash Flow In SMillions $Millions SMillions Millions 50% there after SMillions NPV $1,800 $1,762.56 $50.02 $12.57 $3.46 $40.90 $27.27 $1,900 $1,860.48 $85.72 -$46.20 $12.70 $52.22 $34.82 $2,000 $1,958.40 $61.22 $19.62 $5.40 $47.00 $31.33 $2,100 $2,056.32 $43.72 $0.04 $0.02 $43.70 $29.13 $2,200 $2,154.24 $31.26 $14.50 $7.25 $38.51 $25.67 $2,300 $2,252.16 $31.22 $16.62 $8.31 $39.53 $26.35 $2,400 $31.26 $18.67 $9.33 $40.59 $27.06 $2,500 $2,448.00 $15.61 $36.39 $18.20 $33.80 $22.53 $2,600 $2,545.92 $0.00 $54.08 $27.04 $27.04 $18.03 $2,700 $2,643.84 $0.00 $56.16 $28.08 $28.08 $18.72 $2,600 $2,545.92 + $0.00 $54.08 $27.04 $27.04 $18.03 $2,500 $2,448.00 $52.00 $26.00 $26.00 $17.33 $2,350.08 $49.92 $24.96 $24.96 $16.64 $2,200 $2,154.24 $45.76 $22.88 $15.25 $2,000 $1,958.40 $41.60 $20.80 $20.80 $13.87 $1,800 $1,762.56 $37.44 $18.72 $18.72 $12.48 $1.500 $1.468.80 $31.200 $15.601 $15.601 S10.40 Instructions Cost of Capital Capital Budgeting Average: 29.4806 anon EFSF $2,400 Count: 31 Surn: 737.01 Type here to search 17 18 19 $1,500 $1,200 $800 $400 $1,468.80 $1,175.04 $783.36 $391.68 $37.44 $31.20 $24.96 $16.64 $8.32 $18.72 +$15.60 $12.48 $8.32 $4.16 $18.72 $12.48 $15.60 $10.40 $12.48 $8.32 $8.32 $5.55 $4.16 $2.77 NPV= $381.55 20 Taxable Capital Budgeting Instructions Cost of Capital Average: 294806 Count: 31 Type here to search The following questions will be used to estimate risk. Please use Table 3 to calculate cash flow. 4. The controller is worried about tax increases and estimates that the tax rate with be raised to 50% (federal and Maryland state) in year 4. Also there is a concern that expenses are understated. He asks, "What would happen to the NPV calculation if the cash tax expenses come in 2% higher than estimated and the tax rate increases to 50% in year 4?" This will allow a subjective evaluation of the project risk. Calculate a new cash flow time line with cash expenses 10% higher than those in Table 2 and with a 50% tax rate. Use Table 3 5. What would be the net nresent value NPV in this "worst race" rash flow? What will be the IRR? Instructions Cost of Capital Capital Budgeting O Type here to search Et et 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. Year 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. 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. 121 Table 2 Cash from Cash outflow, Taxable Revenue in expenses in Depreciation in Income in $ Tax in Millions After tax Cash Flow In $Millions SMillions Millions Millions 27.5% rate SMillions 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 16 $1,800 $1,728 $72.00 $19.80 $52.20 $1.83 17 $1,500 $1,440 $60.00 $16.50 $43.50 $1.53 18 $1,200 $1,152 $48.00 $13.20 $34.80 $1.22 S768 $32.00 $8.801 $23.2010.81 Instructions Cost of Capital Capital Budgeting Average: 294806 14 157 191 5800 Count: 3 U V 3 Year $2,350.08 WNLOCO OU W N S T $400 $384 $16.00 $4.40 $27.60 $0.97 Table 3 NPV- $44.54 A B Tax in Millions Cash from Cash outflow, Taxable 27.5% rate in Revenue in expenses in Depreciation in Income in $ years 1, 2, 3 and After tax Cash Flow In SMillions $Millions SMillions Millions 50% there after SMillions NPV $1,800 $1,762.56 $50.02 $12.57 $3.46 $40.90 $27.27 $1,900 $1,860.48 $85.72 -$46.20 $12.70 $52.22 $34.82 $2,000 $1,958.40 $61.22 $19.62 $5.40 $47.00 $31.33 $2,100 $2,056.32 $43.72 $0.04 $0.02 $43.70 $29.13 $2,200 $2,154.24 $31.26 $14.50 $7.25 $38.51 $25.67 $2,300 $2,252.16 $31.22 $16.62 $8.31 $39.53 $26.35 $2,400 $31.26 $18.67 $9.33 $40.59 $27.06 $2,500 $2,448.00 $15.61 $36.39 $18.20 $33.80 $22.53 $2,600 $2,545.92 $0.00 $54.08 $27.04 $27.04 $18.03 $2,700 $2,643.84 $0.00 $56.16 $28.08 $28.08 $18.72 $2,600 $2,545.92 + $0.00 $54.08 $27.04 $27.04 $18.03 $2,500 $2,448.00 $52.00 $26.00 $26.00 $17.33 $2,350.08 $49.92 $24.96 $24.96 $16.64 $2,200 $2,154.24 $45.76 $22.88 $15.25 $2,000 $1,958.40 $41.60 $20.80 $20.80 $13.87 $1,800 $1,762.56 $37.44 $18.72 $18.72 $12.48 $1.500 $1.468.80 $31.200 $15.601 $15.601 S10.40 Instructions Cost of Capital Capital Budgeting Average: 29.4806 anon EFSF $2,400 Count: 31 Surn: 737.01 Type here to search 17 18 19 $1,500 $1,200 $800 $400 $1,468.80 $1,175.04 $783.36 $391.68 $37.44 $31.20 $24.96 $16.64 $8.32 $18.72 +$15.60 $12.48 $8.32 $4.16 $18.72 $12.48 $15.60 $10.40 $12.48 $8.32 $8.32 $5.55 $4.16 $2.77 NPV= $381.55 20 Taxable Capital Budgeting Instructions Cost of Capital Average: 294806 Count: 31 Type here to search