Project Valuation $($Example$)$ Kern Industries is considering the replacement of an older technology with new technology that will have a capitalized base of $$44,500,000.$ The older technology, having a remaining six$-$year useful life $($operating life and accounting life$)$ with no anticipated salvage value under a straight$-$line depreciation method, currently has a book value of $$12,000,000$ and is believed to be marketable at book. Under the current tax system, the new equipment purchase qualifies for the five$-$year MACRS depreciation rates, has no allowable investment tax credit, and has an operating life of six years. Further, the company projects that over the six$-$year life of the new machine, the company will increase revenues by $$15,000,000$ in the first year and expenses by only $$2,000,000$ in the first year $$ in each subsequent year, revenues will increase by $5\%$ and expenses are expected to increase by $8\%.$ In addition, the company plans to invest an additional $$1,000,000$ in working capital $($immediately$)$ and estimates that it will have to increase $($each year$)$ its working capital investment $($inventory$,$ accounts receivable, etc.$)$ by $6\%$ of the increase in revenues. Throughout, the marginal corporate tax rate is expected to remain at $34\%.$ If the firm$$s cost of capital is $12\%,$ what is the value of the technology to this company and should it make this investment? The obvious questions are whether this is a profitable or valuable investment; and, how does one measure the value in order to make such a decision?

Fill in all the estimates for periods $1$ through $6$ on the Excel template, including the total after$-$tax cash flow for each period $$ and complete the depreciation amounts in the table $($which you will need$).$ After that, you should calculate the NPV$,$ IRR, and the profitability index $($PI$)$ for the project.$$Please use the Excel template as your answer.