Tracy Inc. is a sneaker manufacturer. Having spent $120,000 on market research, the firm finds a new line of sneaker promising and contemplates making new investments on it. For further evaluation, Tracy Inc. has gathered the following investment and operational data for the new sneaker product line,

New Equipment

It costs $14,000,000.

5 years economically useful life with zero salvage value.

Depreciation is calculated on the straight-line basis.

Net Working Capital (NWC)

Incremental investment in NWC at the beginning of the project is $1,000,000.

New Sneaker Product

45,000 pairs of new sneakers will be sold every year in the next 5 years.

Each pair of new sneaker will be sold for $700.

Variable cost is $320 per pair.

Fixed cost (excluding depreciation) per year is $7,500,000. Existing Sneaker Product

The launch of new sneaker product would lower the sales volume of existing sneaker product by 13,000 pairs per year in the next 5 years.

Sales price and variable cost for each pair of existing sneaker product are $500 and $280 respectively

1.What is the initial outlay,should the cost of market research be calculated in the initial outlay?

2. What is the Terminal Cash Flow, how

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