Reference no: EM132420189
?(Comprehensive problem?) Traid Winds? Corporation, a firm in the 34 percent marginal tax bracket with a required rate of return or cost of capital of 15 ?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, be terminated. Given the information below.
Determine the free cash flows associated with the? project, the? project's net present? value, the profitability? index, and the internal rate of return. Apply the appropriate decision criteria.
Cost of new plant and equipment $14,800,000
Shipping and installation costs $200,000
Unit sales
YEAR UNITS SOLD
1 70,000
2 120,000
3 120,000
4 80,000
5 70,000
Sales price per unit $300/unit in years 1 through 4, $250/unit in year 5
Variable cost per unit $140/unit
Annual fixed costs $700,000
What is the initial outlay associated with this? project?