Simmonds Products has spent $$258,000($sunk cost$)$ on research to develop lowfat imitation wine. The firm is

planning to spend $$300,000$ on a machine, shipping cost of $$60,000$ and installation costs of $$40,000$ for the

machine. CAPEX will be capitalized and depreciated via straight$-$line over $5-$years. The machine will require a

$$8,000$ increase in inventory levels, account payables will increase by $$20,000,$ while account receivables will

increase by $$15,000.$ The required rate of return is $14$ percent, the tax rate is $25$ percent and ROE is $18$ percent.

Earnings Before Interest, Taxes, Depreciation and Amortization, EBITDA, is expected to be $$270,000$ per year

for years $1$ through $7.$

a$.$ Find CAPEX

b$.$ Find the initial investment, CF$0,$ for the imitation lowfat wine project.

c$.$ Find annual depreciation.

d$.$ Find free cash flow $($FCF$)$ for year $3.$