Q$2)$ Use the information in part B of the table to fill lines $3$ to $5.$ Here, capital replacement should be

adjusted for inflation.

Q$3)$ Use the information in part $C$ of the table to fill lines $6$ to $8$ of column $C.$ Then, complete the rest of

the column, keeping in mind that operating receipts and expenses need to be adjusted for inflation, but

depreciations do not.

Q$4)$ Complete lines $9$ and $10.$ Remember that taxable income does not include capital purchases, sales,

or replacements.

Q$5)$ Calculate the net cash flow and the discounted net cash flow line

Q$6)$ What is the NPV of the expansion project?ACTIVITY $1$: DAIRY FARM EXPANSION

A dairy farmer currently operating a $100-$cow herd is considering adding $50$ more cows to his herd.

The expansion will require the purchase of $50$ cows, building renovations, and acquisition of additional equipment.

Operating revenues come primarily from milk sales.

The $50-$cow addition will be maintained$|$by a ceiling and replacement rate of $20\%$ per year.

The operator has a constant debt$-$to$-$asset ratio of $60\%,$ debt and equity costs of $8\%$ and $12\%,$respectively, and an income tax rate of $20\%.$

The planning horizon is $5$ years

This information is summarized in the table below..

Operating revenues come primarily from milk sales. respectively, and an income tax rate of $20\%.$

The planning horizon is $5$ years

This information is summarized in the table below.

Q$1)$ Use the information in part A of the table to calculate the weighted average cost of capital. What isthe value?

debt to asset ratio$=60\%$ debt cost$=8\%$ equity cost $=12\%$ income tax rate$=20\%$ inflation rate $2\mathrm{.}5\%50$ cows$=$ $$65,000$ building renovations$=30,000$ equipment$=25,000$ total$=$$$120,000$ terminal value$=89,600$ new cow replacement$=6,000$ operating receipts$=140,000$ operating expenses$=105,000$ depreciation$=7,000$