this is question 6 from cost of capital tab.

please help with questions 1 - 6 above this and the tables below. I am attaching the the tables that need to be filled in as well thanks for your help.

The company will need to finance some of the cash to fund $17 million in receivables and $14 million in Inventory starting at year zero. The company expects vendors to give free credit on purchases of $15 million (accounts Payable). Add the net cash outflow for working capital to the cash outflow for the plant, equipment and land in year zero. The $17 million for receivables and the $14 million for Inventory are cash outflows. The $15 million for receivables is a cash inflow. Assume that this net working capital is recovered as a cash inflow in year 21. The company still estimates revenues and expenses the same as it did in Project 4. See Table 2 at the right. The company now estimates that it can sell the land in year 21 for $40 million. It will also recover the cash spent on working capital in year 21. Use the WACC that you calculated in the Cost of Capital tab. (Q-6 of the Cost of Capital tab in Project 5) Questions 1. What will be the tax depreciation each year? Note: the total deprecation of tax purposes will still be $350 million if your calculations are correct 2. Create an after-tax cash flow timeline similar to the one you did in Project 4. (Project 4 eliminated the relatively easy cash flow time line so this will be your first) 3. Should the Project be accepted? The CFO thinks that the likely NPV and IRR will be close to the numbers that you calculated in Project 4. ( this will be your first calculation of NPV and IRR. These two concepts are VERY important in Finance. You must use the NPV and IRR functions in Excel for this question.) The following questions will be used to estimate risk. Please use Table 3 to calculate cash flow 4. The controller is worried about tax increases and estimates that the tax rate with be raised to 50% (federal and Maryland state) in year 4. Also there is a concern that expenses are understated. He asks, "What would happen to the NPV calculation if the cash tax expenses come in 2% higher than estimated and the tax rate increases to 50% in year 4?" This will allow a subjective evaluation of the project risk. Calculate a new cash flow time line with cash expenses 10% higher than those in Table 2 and with a 50% tax rate. A A A x 100 m 5. What would be the net present value in this "worst case" cash flow? What will be the IRR? (Use the NPV and IRR function) 6. Should the project be accepted? Discuss the risk and the reward to McCormick. (this is to see if you can handle decision making under uncertainty. We don't know what will happen in future. Will taxes be raised or not? Will expenses go up or not? Companies must deal with these questions. If you just look at the worst case, not much will happen. We would have no Apple, Microsoft, Tesla, Google, Facebook, or Amazon if these innovators had just abandoned their ideas because someone came up with a worst case scenario, O Type here to search Year -NMnocom $350 Depreciation $50.02 $85.72 Table 1 MACRS Depreciation 7 Year class 14.29% 2 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% $43.72 mono Table 2 A Cash from Cash outflow, Revenue in expenses in Depreciation in Taxable Income Tax in Millions After tax Cash Flow In $Millions $Millions $Millions in $ Millions 27.5% rate SMillions $1,800 $1,728 $50.02 $21.99 $6.05 $65.95 Instructions Cost of Capital Capital Budgeting 18 Year 19 O Type here to search 45 Year mnooo Table 3 A B Tax in Millions Cash from Cash outflow, 27.5% rate in Revenue in expenses in Depreciation in Taxable income years 1,2,3 and After tax Cash Flow In $Millions $Millions SMillions in $ Millions 50% there after Millions 1 $1,800 $1,762.56 $50.02 -$12.57 -$3.46 $40.90 2 $1,900 $1,860.48 $85.72 $46.20 $12.70 $52.22 3 $2,000 $2,100 $2,056.32 $43.72 -$0.04 -$0.02 $43.70 $2,200 $2,300 $2,400 $2,500 $2,600 $2,700 $2,600 $2,545.92 $0.00 $54.08 $27.04 $27.04 $2,500 13 $2,400 14 $2,200 15 $2,000 Instructions Cost of Capital Capital Budgeting geting O Type here to search The company will need to finance some of the cash to fund $17 million in receivables and $14 million in Inventory starting at year zero. The company expects vendors to give free credit on purchases of $15 million (accounts Payable). Add the net cash outflow for working capital to the cash outflow for the plant, equipment and land in year zero. The $17 million for receivables and the $14 million for Inventory are cash outflows. The $15 million for receivables is a cash inflow. Assume that this net working capital is recovered as a cash inflow in year 21. The company still estimates revenues and expenses the same as it did in Project 4. See Table 2 at the right. The company now estimates that it can sell the land in year 21 for $40 million. It will also recover the cash spent on working capital in year 21. Use the WACC that you calculated in the Cost of Capital tab. (Q-6 of the Cost of Capital tab in Project 5) Questions 1. What will be the tax depreciation each year? Note: the total deprecation of tax purposes will still be $350 million if your calculations are correct 2. Create an after-tax cash flow timeline similar to the one you did in Project 4. (Project 4 eliminated the relatively easy cash flow time line so this will be your first) 3. Should the Project be accepted? The CFO thinks that the likely NPV and IRR will be close to the numbers that you calculated in Project 4. ( this will be your first calculation of NPV and IRR. These two concepts are VERY important in Finance. You must use the NPV and IRR functions in Excel for this question.) The following questions will be used to estimate risk. Please use Table 3 to calculate cash flow 4. The controller is worried about tax increases and estimates that the tax rate with be raised to 50% (federal and Maryland state) in year 4. Also there is a concern that expenses are understated. He asks, "What would happen to the NPV calculation if the cash tax expenses come in 2% higher than estimated and the tax rate increases to 50% in year 4?" This will allow a subjective evaluation of the project risk. Calculate a new cash flow time line with cash expenses 10% higher than those in Table 2 and with a 50% tax rate. A A A x 100 m 5. What would be the net present value in this "worst case" cash flow? What will be the IRR? (Use the NPV and IRR function) 6. Should the project be accepted? Discuss the risk and the reward to McCormick. (this is to see if you can handle decision making under uncertainty. We don't know what will happen in future. Will taxes be raised or not? Will expenses go up or not? Companies must deal with these questions. If you just look at the worst case, not much will happen. We would have no Apple, Microsoft, Tesla, Google, Facebook, or Amazon if these innovators had just abandoned their ideas because someone came up with a worst case scenario, O Type here to search Year -NMnocom $350 Depreciation $50.02 $85.72 Table 1 MACRS Depreciation 7 Year class 14.29% 2 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% $43.72 mono Table 2 A Cash from Cash outflow, Revenue in expenses in Depreciation in Taxable Income Tax in Millions After tax Cash Flow In $Millions $Millions $Millions in $ Millions 27.5% rate SMillions $1,800 $1,728 $50.02 $21.99 $6.05 $65.95 Instructions Cost of Capital Capital Budgeting 18 Year 19 O Type here to search 45 Year mnooo Table 3 A B Tax in Millions Cash from Cash outflow, 27.5% rate in Revenue in expenses in Depreciation in Taxable income years 1,2,3 and After tax Cash Flow In $Millions $Millions SMillions in $ Millions 50% there after Millions 1 $1,800 $1,762.56 $50.02 -$12.57 -$3.46 $40.90 2 $1,900 $1,860.48 $85.72 $46.20 $12.70 $52.22 3 $2,000 $2,100 $2,056.32 $43.72 -$0.04 -$0.02 $43.70 $2,200 $2,300 $2,400 $2,500 $2,600 $2,700 $2,600 $2,545.92 $0.00 $54.08 $27.04 $27.04 $2,500 13 $2,400 14 $2,200 15 $2,000 Instructions Cost of Capital Capital Budgeting geting O Type here to search