Q3 $ 3 15 Universal Farm Supply's management team has observed that the company can sell as much fertilizer as it can stock. They are considering purchasing a forklift and additional warehouse space to stock more fertilizer. The forklift costs $51,000 and will be depreciated to a salvage value of $0 in 8 years even though it is expected to last the life of the project. The additional warehouse space costs $127.000 and will be depreciated to a salvage value of $37,000 over 15 years. At the end of that year the project will be wound down, and the warehouse and forklift will be sold for an estimated $33,000. If the forklift and warehouse space are purchased it will allow Universal to sell an additional 1,800,000 pounds of fertilizer annually. Universal sells fertilizer for $0.65 per pound, and it costs $0.62 per pound. The increase in sales will require an additional $31,000 in Net Working Capital Universal Os marginal tax rate is 33%, and the required return for this project is 15% Fill in all the missing information to project the cash flows for Universal's proposed expansion. Forklift Warehouse Cost 51.000 $ 127,000 Salvage Values $ 37,000 Life 8 0 Depreciation 1 Sorap Value $ 33,000 Change in NW $ 31,000 23 Sales Increas 1.800.000 24 Price per Pous 0.65 25 Cost per Pour 0.62 26 Profit per Pound Tax Rate 33% 28 Required Retu 157. 29 Year One Time CFS Profits Depreciation Taxes After Tax CFs PV 31 32 1 33 2 34 3 35 36 37 6 38 39 8 40 41 10 42 11 43 12 44 13 45 14 46 15 47 48 What are the net present value and internal rate of return for the expansion? Should Universal expand? 49 50 NPV 51 IRA Expand? 53 54 27 30 0 4 5 7