Torque O Matic, headquarter in Cleveland, Ohio, sells its High Torque (HT) pneumatic wrenches to industrial building contractors. Torque O Matic's manufacturing plant and it's one distribution facility are located about 5 miles from corporate headquarters. More than 3/4 of Torque O Matic's sales are in the Northeast. (Blue oval on map.) Torque O Matc is the leading supplier of HT wrenches in the Northeast.

Torque O Matic is considering building a second manufacturing and distribution facility in Atlanta, Ga. to take advantage of an expected boom in building construction in the South and Southeast. (Green oval on map) Torque O Matic now has minimal sales in this region. This would be a major investment for Torque O Matic.

Torque-O-Matic's finance department has prepared the following expected incremental cash flow statement for the investment.

(Each line in the cash flow statement is the difference between Invest in Atlanta Facility and Do Nothing)

(000s of $s)
Year	1	2	3	4	5	6	7
Cash-Inflow (Payments from Customers)	$4,565	$7,310	$11,005	$15,340	$18,560	$21,345	$23,480
Cash-Outflow
Manufacturing	$2,055	$2,560	$3,300	$4,600	$5,570	$6,405	$7,045
Commercial	$1,370	$1,830	$2,200	$2,300	$2,785	$3,200	$3,525
Administrative	$685	$1,095	$1,650	$2,300	$2,785	$3,200	$3,525
Income Taxes	$0	$0	$530	$1,225	$1,780	$2,130	$2,345
Capital Spending	$425	$455	$1,350	$2,550	$975	$1,000	$1,750
Other	$380	$570	$785	$1,070	$1,100	$1,200	$1,250
Total Cash-Outflow	$4,915	$6,510	$9,815	$14,045	$14,995	$17,135	$19,440
Net Operating Cash Flow	($350)	$800	$1,190	$1,295	$3,565	$4,210	$4,040

(1) What projections/assumptions were made to calculate the expected cash-inflow?

(2) How would you determine whether the expected cash in-flows were "realistic?"

(3) What projections/assumptions were made to calculate manufacturing cash-outflow?

(4) What projections/assumptions were made to calculate commercial cash-outflow?

(5) How would you deternine whether these expected cash-outflows were "realistic?"

(6)Torque-O-Matic's CFO has determined the required rate of return for this project is 10%

What is the maximum the company could sprend in Year 0 and decide to go ahead with this project?