year O-5

npv

irr

pi

(Related to Checkpoint 12.1) (Comprehensive problem calculating project cash flows, NPV, PI, and IRR) Traid Winds Corporation, a firm in the 30 percent marginal tax bracket with a required rate of return or discount rate of 13 percent, is considering a new project. This project involves the introduction of a new product. The project is expected to last 5 years and then, because this is somewhat of a fad product, it will be terminated. Given the following information, , determine the free cash flows associated with the project, the project's net present value, the profitability index, and the intenal rate of retun. Apply the appropriate decision criteria. a. Determine the free cash flows associated with the project The FCF in year 0 is S (Round to the nearest dollar.) Cost of new plant and equipment: $14,800,000 Shipping and installation costs: $220,000 Unit sales: Year Units Sold 1 75,000 2 130,000 130,000 85,000 bo 5 75,000 Sales price per unit: Variable cost per unit: $320/unit in years 1 through 4, $270/unit in year 5 $100/unit