You have been asked to analyze a project to supply an automobile manufacturer with 35,000 tons of machine screws during the first year of production. The tonnage demand falls by two thousand pounds every year through the 5th year, where only 27,000 tons would be needed. You will need an initial $2,900,000 investment in threading equipment to get the project started. The project will last for five years, and the asset will be depreciated using the MACRS 5-year schedule. The accounting department estimates that annual fixed costs will be $495,000 and that variable costs should be $285 per ton. It is estimated that a salvage value of $30,000 applies to the asset at the end of the 5th year of use. The marketing & sales department estimate that the automakers will accept the project at a selling price of $345 per ton. It is also estimated that you will need an initial net working capital investment of $450,000. All working capital will be recovered at the end of the project. The firms cost of capital is 13%, and has a marginal tax rate of 38%. * Find the annual free cash flow estimates for the project * Calculate the Net Present Value of the project. Should the firm pursue this project? * Suppose you doubt the estimates for - Initial Cost of Asset - Salvage Value of Asset - Sales Price - Variable Cost - Working Capital Investment Adjust the inputs for +/- 10% of the estimated values. Provide a pessimistic and optimistic analysis for each input variable. Document the resulting Net Present Value in table format. The table should consist of fifteen different calculations for Net Present Value. Are there any input variables that drastically impact the viability of the project? Hintif you sale the asset at a loss relative to the book value, it translates into a tax credit, as opposed to tax payment Hintunder the expected scenario, the resulting NPV is somewhere between $700,000 and $800,000