SHOW STEPS! You are the manager of the new Westchester In$-$N$-$Out location, and you are considering adding a $2^{nd}$ kitchen to keep up with LMU student demand. The location's annual revenue is currently $$10,000,000,$ and this expansion will add an additional $8\%$ in annual revenue. The associated annual costs for running the new kitchen are $$100,000.$ The new kitchen will cost $$3,000,000$ to build, it will operate for five years, after which time it will be worthless, and it will be depreciated using the MACRs $5-$year rates. Additionally, you must purchase $$1,000,000$ in food service machines, which have the same estimated five$-$year life with no salvage value. However, the kitchen equipment is depreciated using MACRs $3-$year rates. In$-$N$-$Out is subject to a $20\%$ tax rate and this project has a cost of capital of $7\%.$

a$.$ What are the periodic cash flows associated with the project?

b$.$ based on the NPV rule should you commence with the building?

c$.$based on the IRR rule, should you commence with the building plan?

d$.$if management determines the project is viable only if it has a discounted payback of less than or equal to six years, should you commence with the building plan?

e$.$ what is the expansions profitability index?