Question 7 (30 points) Tesoro Inc. currently has one product, low-priced golf clubs. Tesoro Inc. has decided to sell a new line of medium-priced golf clubs. Sales for the new line of golf clubs are estimated at $80 million a year. Variable costs are 70% of sales. The project is expected to last 8 years. In addition to the production variable costs, the fixed costs each year will be $10,000,000. The company has spent 5,000,000 in research and a marketing study that determined the company will increase $2 million in sales a year of its existing low-priced golf clubs. The production variable cost of the existing low-priced golf clubs is $1 million a year The plant and equipment required for producing the new line of golf clubs costs $45,000,000 and will be depreciated down to zero over 15 years using straight-line depreciation. It is expected that the plant and equipment can be sold (market or scrap value) for $20,000,000 at the end of 8 years. The new golf clubs will also require today an increase in net working capital of $4,000,000 that will be returned at the end of the project The tax rate is 25% and the cost of capital is 8%. 1. What is the initial outlay (I0) for this project? 2. What is the annual Earnings Before Interests, taxes, and Depreciation (EBITDA) for this project? 3. What is the annual Taxable Income for this project? 4. What is the annual OCF for this project? 5. What is the remaining book value, at the end of the project, of the plant and equipment? 6. What is the Termination value (at the end of the life of the project) of the Plant and Equipment? 7. What is the Termination Value for this project