The Alameda County Times (a daily newspaper company) is considering introducing a new monthly magazine. The company anticipates that it will cost $30 million in initial cost to create and produce this magazine, and that it can depreciate this cost straight line to zero over the next 4 years. The equipment will be sold for $5 million at the end of 4 years. The company expects to price the magazine at an average of $4.00 an issue and also expects an average advertising revenue of $2.50 per issue sold. The printing and production costs are expected to be $3.50 per issue. The magazine will be produced by the existing staff of the newspaper resulting in an increase in actual payroll cost by 20% from its current level of $25 million. The project will result in a reduction in working capital investment equal to 10% of first year revenues at the beginning of the project. The reduction in working capital will be reversed at the end of the project. The companys cost of capital is 10% and the marginal tax rate is 20%.

Should the company accept the project if it expects to sell 3,600,000 copies of the magazine each year for the next 4 years?

(Remember to identify the following in your analysis: Initial Outlay, Operational cash flow for each year, Terminal cash flow and the economic justification for your recommendation).