When determining incremental unlevered net income, should all the expenses listed be included? If not, what expenses should we exclude and why?

Initial Capital Expenditure

Useful Life of Equipment

Annual Depreciation

Sales in Year 1

Sales Growth through Year 6

Sales Growth Year 6 Onward

Free Cash Flow Year 6 Onward

Cost of Goods Sold (% of sales)

Incremental SG&A Expense

25% of the Incremental SG&A Expense is an overhead expense that will be incurred even if the project is not accepted.

Market Research Expense

This research was completed last month to be paid by the end of next year

Initial Net Working Capital

Accounts Receivable % of Next Year Sales

Inventory % of Next Year COGS

Accounts Payable % of Next Year COGS

Interest Expense

Average Tax Rate

Cost of Capital

Marginal Tax Rate