The controller of the Front Range Airways is considering the addition of a new on$-$site maintenance facility at

its main airport of Centennial Airport. The addition will has two primary benefits: to eliminate its reliance on

the maintenance of its fleet by outside contractors and create the opportunity to sell its maintenance program

to other commuter airlines. The new maintenance facility will allow the Front Range Airways not only to

reduce its operating costs but also to increase its revenue. The new on$-$site maintenance program is expected

to reduce the fleet's downtime by $1$ day which allows the Front Range Airlines to schedule more flights. The

question for the controller is whether these expected benefits were enough to justify the $$24$ million capital

outlay plus the incremental investment in working capital over the six$-$year life of the project.

Construction will start in January $2024.$ $$22$ million of the capital outlay will be spent in $2024$ and the

remaining $$2$ million will be used in $2025.$ When the new on$-$sire maintenance facility begins operating in

$2025,$ it is expected to significantly reduce the operating costs of the airline. These operating savings will

come mainly from the difference between the cost of self$-$maintenance and the cost of buying maintenance

contract from the open market. The controller's estimate shows that the operating savings will be $$2$ million

for $2025$ and $$2\mathrm{.}5$ million per year for the following five years.

The controller also plans to take advantage of reduced fleet downtime to schedule more flights to

create additional revenue. For $2025,$ she expects to show additional $$4$ million revenue from its increased

utilization of the airline's fleet. She expects the additional revenue to top at $$10$ million in $2026$ and continue

to stay at that level through $2030.$ It is estimated that the cost of goods sold $($mainly fuel$)$ will be $68\%$ of

revenue, and SG&A will be $5\%$ of revenue.

In addition to the capital outlay of $$24$ million, this project will require the Front Range Airways to

invest in increased level of inventories and accounts receivable. No changes in current liabilities are expected

from this project. The total net working capital is expected to average $10\%$ of annual revenue. This means

that the amount of net working capital investment each year will equal $10\%$ of incremental revenue for the

year. At the end of the life of the project in $2030,$ all the net working capital on the books will be recoverable

at cost$.$ The salvage value of the capital outlay is expected to be zero. Tax rate would be $21\%,$ and the capital

outlay of $$24$ million will be depreciated under straight$-$line schedule, starting $2025.$

The firm's long$-$term bond is rated as Baa as of today. The firm's stock beta is $1\mathrm{.}25.$ Other financial

information is provided in the Exhibits below.

Should this company accept this project?