Standard Food Company plans to establish a new production line for producing ice creams. The equipment costs $500,000 with a 10-year life. For depreciation the company is using MACRS method (you need to check the IRS table online or in the textbook). The project is expected to generate $ 200,000 worth of sale every year. The annual fixed expense is $ 40,000 per year, and the variable cost is always 35% of the revenue of the same year. Starting at year 0, the company needs to maintain an inventory that is worth 15% of next years sale. At the end of the project, no inventory needs to be maintained and all existing inventory will be liquidated. Also, at the end of the project the equipment will be sold at a market value of $ 30,000. Assuming the tax rate is 40% and the cost of capital is 9% for the company.

PLEASE USE EXCEL AND SHOW FORMULAS, THANK YOU!

Create a capital budgeting table with the calculation of Free Cash Flows for each year of the project. (20 points, you must show all your work to earn full credits; Hint: must include operating cash flows, change of networking capital, initial investment, and salvage cash flow)

Calculate the Projects NPV, IRR, Regular Payback Period, Discounted Payback Period and Modified Internal Rate of Return, assuming a 9% reinvestment rate (12 points) Please show all your work for full credit.