The included question relate to this one prompt: Starbucks is considering a project where they will sell to the public the coffee makers that they use in their stores. This way customers can brew their Starbuck$$s coffees at home and not have to worry about going inside the restaurant and being exposed to other people or having to spend money on gas driving to the store. The chief marketing officer $($CMO$)$ estimates that they will sell $5,000$ units a year for $5$ years at a price of $$135$ each. The chief operations officer $($COO$)$ estimates that the variable costs to build these will be $76\mathrm{.}4\%$ of revenue. The COO says the company will need to buy an assembly line to make these. The assembly line costs $$575,000$ and has a shipping cost of $$15,000.$ The COO adds that they will need to purchase an additional $$40,000$ in inventory and accounts payable will increase by $$7,000.$ Once the project ends, they will no longer need additional inventory and will pay the accounts payable balance. The chief financial officer $($CFO$)$ The CFO says to use the MACRS $3$ year class for depreciation. $($These are the same rates as used in the slides.$)$ He estimates that the assembly line will have a salvage value of $$12,000.$ He notes that Starbuck$$s tax rate is $22\mathrm{.}5\%$ and that the normal WACC is $9\mathrm{.}1\%.$ The CMO notes that they have done an extensive marketing survey and many Starbucks customers are scared to go to a store in today$$s environment and would be happy to purchase their own equipment. This research is already paid for and cost $$75,000.$

What are the capital expenditures for this project?

a$.440,000$ B$.475,000$ c$.590,000$ d$.600,000$

What are the cash flows for year $0$ of this project?

a$.-594,500$ b$.-623,000$ c$.-667,500$ d$.-704,000$

What is the depreciation expense in year $2$ for this project?

a$.93,750$ b$.166,000$ c$.171,250$ d$.265,500$

What is the revenue in year $4$ for this project?

a$.417,000$ b$.525,000$ c$\mathrm{.}675,000$ d$.825,000$

What are the variable costs in year $1$ for this project?

a$.318,250$ b$.323,750$ c$.499,000$ d$.515,700$

What is the EBIT in year $3$ for this project?

a$.-72,150$ b$.70,800$ c$.120,760$ d$.154,750$

What are the tax expenses in year $4$ of this project?

a$.26,550$ b$.27,522$ c$.29,857$ d$.42,000$

What are the operating cash flows in year $2?($This is the EBIT $(1-$T$)+$ Dep. Ex$)$

a$.177,650$ b$.183,195$ c$.149,517$ d$.158,045$

What is the after tax salvage value?

a$.7,856$ b$.8,052$ c$.9,300$ d$.10,800$

What are the terminal cash flows?

a$.29,740$ b$\mathrm{.}36,356$ c$.37,052$ d$.42,300$

Should the $$75,000$ spent on marketing research be included in this business case? If so$,$ where?

a$.$ Yes$-$ this is an operating cost b$.$ yes$-$ this is a revenue reduction c$.$ yes$-$ this is an outflow in year $0$ d$.$ this is a sunk cost

This project does have normal cash flows and we can use IRR to evaluate it

a$.$ True b$.$ false

What is the MIRR of this project? Use the WACC as both the reinvestment rate and finance rate

a$.7\mathrm{.}74\%$ b$\mathrm{.}7\mathrm{.}90\%$ c$\mathrm{.}8\mathrm{.}94\%$ d$\mathrm{.}10\mathrm{.}22\%$

Which of the following is a TRUE statement about this project?

a$.$ NPV$,$IRR, and MIRR indicate that this project will provide a positive return. B$.$ NPV and MIRR indicate that this project will provide Starbucks positive results but IRR indicates negative results. C$.$ NPV and IRR indicate this project will provide STARBUCKS positive results but MIRR indicates negative results D$.$ NPV$,$ IRR and MIRR indicate that this project will provide a Starbucks negative return

If interest rates decrease, then Starbuck's will see their WACC decrease. If Starbuck's had a WACC of $8\mathrm{.}5\%$ instead of $9\mathrm{.}1\%,$ which of the following would be a TRUE statement about this project?

a$.$ NPV$,$ IRR and MIRR indicate that this project will provide Starbucks positive results b$.$ NPV and MIRR indicate that this project will provide Starbucks positive results but IRR indicate negative results. C$.$ NPV and IRR indicate that this project will provide Starbucks positive results but MIRR indicates negative results. D$.$ npv$,$ IRR and MIRR all indicate that this project will be negative for Starbuck$$s

What is the IRR of this project?

a$.4\mathrm{.}67\%$ b$\mathrm{.}7\mathrm{.}94\%$ c$.8\mathrm{.}05\%$ d$\mathrm{.}8\mathrm{.}82\%$

What is the NPV of this project?

a$.-13000\mathrm{.}44$ b$.4,436\mathrm{.}38$ c$.1,555\mathrm{.}89$ d$.4,660\mathrm{.}95$