Reference no: EM131898810

After spending $ 10 comma 600 $10,600 on? client-development, you have just been offered a big production contract by a new client. The contract will add $ 192 comma 000 $192,000 to your revenues for each of the next five years and it will cost you $ 101 comma 000 $101,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully? depreciated, but could be sold for $ 55 comma 000 $55,000 now. If you use it in the? project, it will be worthless at the end of the project. You will buy new equipment valued at $ 33 comma 000 $33,000 and use the? 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $ 83 comma 000 $83,000 per year. Since she is busy with ongoing? projects, you are planning to hire an assistant at $ 36 comma 000 $36,000 per year to help with the expansion. You will have to immediately increase your inventory from $ 20 comma 000 $20,000 to $ 30 comma 000 $30,000. It will return to $ 20 comma 000 $20,000 at the end of the project. Your? company's tax rate is 35 % 35% and your discount rate is 15.8 % 15.8%. What is the NPV of the? contract? Note?: Assume that the equipment is put into use in year 1. Calculate the free cash flows? below: ?(Round to the nearest? dollar.) Year 0 Sales $ - Cost of Goods Sold $ Gross Profit $ - Annual Cost $ - Depreciation $ EBIT $ - Tax $ Incremental Earnings $ + Depreciation $ - Incremental Working Capital $ - Opportunity Cost $ - Capital Investment $ Incremental Free Cash Flow $