Walmart is trying to access the risk of a possible project. The project demands an investment of $10.55 million in a certain type of machine, and an added $1.45 million in changing the machine in order to upgrade it. The machine is fully depreciated at the time of buying it, and the salvage value of the machine is estimated to be $1.4 million. The project needs a $650,000 investment in net operating work capital and has a lifespan of 5 years, and The company has a 28% tax rate, and its WACC is 15%.

What is the project's free cash flow for the years 0, 1, 2, 3, 4 & 5?

- Should they invest? Explain.

Question

Walmart is trying to access the risk of a possible project. The project demands an investment of $10.55 million in a certain type of machine, and an added $1.45 million in changing the machine in order to upgrade it. The machine is fully depreciated at the time of buying it, and the salvage value of the machine is estimated to be $1.4 million. The project needs a $650,000 investment in net operating work capital and has a lifespan of 5 years, and The company has a 28% tax rate, and its WACC is 15%.

What is the project's free cash flow for the years 0, 1, 2, 3, 4 & 5?

- Should they invest? Explain.