Use an Excel spreadsheet to present the solution to the following four questions: The Ironworks Pegs Corporation, facing a market that is requiring more and more of the square- type pegs as opposed to the round one is considering a project to start producing square pegs to meet the expected growth in the market demand. In order to produce the new pegs, the company needs to replace an existing old machine that produces round pegs with a new one. The new machine costs $270,000 (plus $30.000 in shipping and installation). The old machine has been fully depreciated and the new one would be depreciated on a straight-line basis over its estimated useful life of 12 years. If the decision is made to go ahead with the project the old machine will be sold for $46,000. Annual revenues are expected to be $248.000; cost of goods sold $74,000; operating costs (excluding depreciation) $64.000. The company would need to set aside $35.000 as an estimated cost of training a crew to operate the new machine. Also, the size of the new equipment would require that the it be housed in a nearby storage facility the company has purchased some time ago for $25,000 and that now is estimated to have a market value of $40,000. The company estimates the actual productive life of the project at nine years, after which the new machine would be sold for a salvage value of $115,000. The existing operating profit (EBIT) from the old machine is $12,000 per year (which is assumed to continue for the following nine years if the new project does not get the green light). The initial net working capital needed for the expanded operations is estimated at $48,000. The NWC will rise to $62,000 by the end of year one, then to $92.000 by the end of year two. No additional changes in NWC are expected for years three through six. By the end of year seven, the NWC would be reduced to $52,000, then to $24,000 in year eight (no theft, spoilage, or obsolescence is assumed to have occurred by the end of year nine). The way the company made all these estimates is by conducting a technical and economic feasibility study that cost $60,000. It also cost $26,000 to market-test the new widgets. The company's marginal tax rate is 25%. The required rate of return on this investment (aka cost of capital) is 12%. 3. Estimate all the relevant annual free cash flows and show them on a timeline using the Excel spreadsheet 4. Use the six capital budgeting decision criteria to make a decision as to whether to go ahead with the project. Use the Excel finance functions. Assume a 7-year acceptable payback period. Use an Excel spreadsheet to present the solution to the following four questions: The Ironworks Pegs Corporation, facing a market that is requiring more and more of the square- type pegs as opposed to the round one is considering a project to start producing square pegs to meet the expected growth in the market demand. In order to produce the new pegs, the company needs to replace an existing old machine that produces round pegs with a new one. The new machine costs $270,000 (plus $30.000 in shipping and installation). The old machine has been fully depreciated and the new one would be depreciated on a straight-line basis over its estimated useful life of 12 years. If the decision is made to go ahead with the project the old machine will be sold for $46,000. Annual revenues are expected to be $248.000; cost of goods sold $74,000; operating costs (excluding depreciation) $64.000. The company would need to set aside $35.000 as an estimated cost of training a crew to operate the new machine. Also, the size of the new equipment would require that the it be housed in a nearby storage facility the company has purchased some time ago for $25,000 and that now is estimated to have a market value of $40,000. The company estimates the actual productive life of the project at nine years, after which the new machine would be sold for a salvage value of $115,000. The existing operating profit (EBIT) from the old machine is $12,000 per year (which is assumed to continue for the following nine years if the new project does not get the green light). The initial net working capital needed for the expanded operations is estimated at $48,000. The NWC will rise to $62,000 by the end of year one, then to $92.000 by the end of year two. No additional changes in NWC are expected for years three through six. By the end of year seven, the NWC would be reduced to $52,000, then to $24,000 in year eight (no theft, spoilage, or obsolescence is assumed to have occurred by the end of year nine). The way the company made all these estimates is by conducting a technical and economic feasibility study that cost $60,000. It also cost $26,000 to market-test the new widgets. The company's marginal tax rate is 25%. The required rate of return on this investment (aka cost of capital) is 12%. 3. Estimate all the relevant annual free cash flows and show them on a timeline using the Excel spreadsheet 4. Use the six capital budgeting decision criteria to make a decision as to whether to go ahead with the project. Use the Excel finance functions. Assume a 7-year acceptable payback period