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UM Corporation plans to produce bows it can go into production for an initial investment in equipment of an im million). The equipment will be

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UM Corporation plans to produce bows it can go into production for an initial investment in equipment of an im million). The equipment will be depreciated straight line over 3 years to a salvage value of 20. UM assume that the equipment has no salvage value when allocating the depreciation expenses but Tater find out that the equipment can be sold for $2m at the end of year 4 UM needs to spend 0.2m to uninstall and clear up the equipment in year 4. The firm's working capital policy is as follow give out 3 months credit to her clients and maintained inventory at a level of 2055 next year's forecast sales. The form estimates production cost expenses equal to $2 unit and believes that the box can be sold for $6 each. The project will come to an end at the end of year when the box becomes obsolete in style. The tax rate of the firm is 40 and the required rate of return on the project is 10% Sales forecasts are in minimo unit: 1m units, 1.2m units and 15m units for years 1 to 3 respectively. [Note: Show all detail calculations and use two decimal points for percentage for numeric) in computations and answers.) (a) (7%) What are the cash flows generated from operating (OCF) for each year (yrs. to 4? Present the figures in a profit and loss table same as your assignment) b) (4) What are the total working capital, (a) change in working capital and (ii) the cash flows generated from change in working capital for each year years 0 to 47 Ich (5%) What are the cash flows for UM in year 4 generated from the sales of equipment and project end clearing expenses Brietly explain why you need for do not need to pay tax for the $2m equipment sales at your & (d) (4%) What are the total cash flows generated from operating cash flows change in working capital, initial Investments and ending expenses for each year yours 0 to 417 (c) (5%) What is the projects? Should the firm acceptineject the project Why

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