1. What is the Total Free Cash Flow for Year 0 and Year 1?

2. What is the Total Free Cash Flow for Year 2 and Year 3?

3. What is the Total Free Cash Flow for Year 4 and Year 5?

Oilfield Automation Inc. Proposed Project: Expand Manufacturing Facility Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Initial Cash Outlay ($900,000) ($250,000) ($125,000) $287,500 Construction Costs Machinery and Equipment Inventory Income Tax Benefit (25%) (= $900,000 + $250,000 = $1,150,000 x 25%) Self Replaced Equipment Less: Capital Gains Including Tax $320,000 ($42,500) (= $320,000 less $150,000 = $170,000 x 25%) Annual Cash Flows Sales: Units 25 35 53 36 15 $35,000 $875,000 $1,225,000 $35,000 $525,000 ($525,000) ($735,000) ($1,113,000) ($756,000) ($315,000) ($90,000) $0 $35,000 $35,000 $1,855,000 $1,260,000 $35,000 Sales: Average Price/Unit Sales: Dollars Cost of Goods Sold (60% of Sales) ($90,000) $50,000 $310,000 ($90,000) $50,000 ($90,000) $50,000 ($90,000) $0 Fixed Costs Depreciation Expense: old assets (opp. Cost) Earnings Before Taxes Income Taxes (25%) $450,000 ($77,500) ($112,500) $337,500 ($50,000) $287,500 $702,000 ($175,500) ($103,500) $526,500 ($50,000) $476,500 $414,000 $120,000 ($30,000) $90,000 $0 $90,000 $232,500 ($50,000) $182,500 $310,500 $0 Net Income Addback: Depreciation Expense (opp. Cost) $310,500 Operating Cash Flow Terminal Year Cash Flows $250,000 ($62,500) $30,000 $217,500 Sale of Excess Capital Assets Sales Value Less: Capital Gains Income Taxes = ($250,000 less $0 Book Value) x 25% Inventory Liquidation (at Book Value of Cost) $182,500 ($710,000) $287,500 $476,500 $310,500 $307,500 Total Cash Flows