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4. A Capital Budgeting Problem Standard Food Burger (a restaurant) plans to purchase a coco-cola free-style contactless beverage dispenser. The equipment costs $5,000 with a 3-year life. For depreciation, the company is using MACRS method. The project is projected to generate $ 4,000 worth of sales in the first year. The sale will grow at 10% per year until the end of year 3. The annual fixed expense is $ 1,000 per year, and the variable cost is always 20% of the sales of the same year. Starting at year 0, the company needs to maintain an inventory of pulp that is worth 10% of next year's sale. At the end of the project, no inventory needs to be maintained and all existing inventory will be liquidated for cash. Also, at the end of the project the equipment will be sold at a market value of $ 500. Assuming the tax rate is 25% and the cost of capital is 10% for the company. Each year, the company pays $500 interest (financial cost) to a bank. Please answer the following questions: a. Create a capital budgeting table to show the free cash flows for the new project. Please show all details for full credits (25 points) Hint: must include operating cash flows, change of networking capital, initial investment, and salvage cash flow. b. Calculate the Project's NPV, IRR, Regular Payback Period, Discounted Payback Period and Modified Internal Rate of Return, assuming a 9% reinvestment rate (20 points) c. Please calculate the sensitivity of NPV to 1" year sales (4 points) and the sensitivity of NPV to cost of equipment (2 points). (Hint: you can change the variable by 10% and then calculate the new NPV). Please report which variable would affect NPV at a greater degree (4 points, Hint: solve for the slopes of the sensitivity lines)

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