0 I've already provided the the Old and New situation and calculated the Intial Outlay. What you shoud focus on is that, under the Old Situation, there were no fixed costs and now there is a fixed Labor Expense of $130,000 and Depreciation. REMEMBER: Depreciation is not a cash flow item, however the tax savings from depreciation is a cash flow savings. Now, complete the areas shaded in Purple. Chicago Turkey Data Old Situation New Situation Turkeys per Year 500,000 500,000 Cost per Turkey $ 7.00 $ 6.00 Shipping Cost per Turkey $ $ 1.00 $ 1.50 Selling Price $ 10.00 $ 10.00 Total Variable Cost per Turkey $ 8.00 $ 7.50 Additional Gross Profit per Turkey $ 0.50 Investment in Additional Turkeys $ 15,000.00 Land Cost $ 150,000.00 Buildings Cost $ 300,000.00 Labor Expense $ $ 130,000.00 Depreciation Salvage Value (Buildings) $ 100,000.00 Annual Depreciation Expense $ 40,000.00 Actual Salvage Value (Land) $ 200,000.00 Actual Salvage Value (Buildings) $ 100,000.00 Life of Project 5 Tax Rate 34% Weighted Average Cost of Capital 11% Cash Reinvestment Rate 1.5% Initial Outlay $ 465,000.00 Annual After-tax Cash Flow $ 178,600.00 0 Terminal Cash Flow $ 181,000.00 0 Period Cash Flow 0 $ (465,000.00) 1 $ 178,600.00 2 $ 178,600.00 3 $ 178,600.00 4 $ 178,600.00 5 $ 359,600.00 Profitability Measures Payback Period NPV Profitability Index IRR MIRR 0.99 $302,501.90 1.85 31.90% 18.82% 0 0 0 0 0 0 I've already provided the the Old and New situation and calculated the Intial Outlay. What you shoud focus on is that, under the Old Situation, there were no fixed costs and now there is a fixed Labor Expense of $130,000 and Depreciation. REMEMBER: Depreciation is not a cash flow item, however the tax savings from depreciation is a cash flow savings. Now, complete the areas shaded in Purple. Chicago Turkey Data Old Situation New Situation Turkeys per Year 500,000 500,000 Cost per Turkey $ 7.00 $ 6.00 Shipping Cost per Turkey $ $ 1.00 $ 1.50 Selling Price $ 10.00 $ 10.00 Total Variable Cost per Turkey $ 8.00 $ 7.50 Additional Gross Profit per Turkey $ 0.50 Investment in Additional Turkeys $ 15,000.00 Land Cost $ 150,000.00 Buildings Cost $ 300,000.00 Labor Expense $ $ 130,000.00 Depreciation Salvage Value (Buildings) $ 100,000.00 Annual Depreciation Expense $ 40,000.00 Actual Salvage Value (Land) $ 200,000.00 Actual Salvage Value (Buildings) $ 100,000.00 Life of Project 5 Tax Rate 34% Weighted Average Cost of Capital 11% Cash Reinvestment Rate 1.5% Initial Outlay $ 465,000.00 Annual After-tax Cash Flow $ 178,600.00 0 Terminal Cash Flow $ 181,000.00 0 Period Cash Flow 0 $ (465,000.00) 1 $ 178,600.00 2 $ 178,600.00 3 $ 178,600.00 4 $ 178,600.00 5 $ 359,600.00 Profitability Measures Payback Period NPV Profitability Index IRR MIRR 0.99 $302,501.90 1.85 31.90% 18.82% 0 0 0 0 0