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(Comprehensive problem) The Shome Corporation, a firm in the 26 percent marginal tax bracket with a required rate of retum or cost of capital of 12 percent, is considering a new project. The project involves the introduction of a new product. This project is expected to last 5 years and then, because this is somewhat of a fad product, 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 internal rate of return. Apply the appropriate decision criteria. a. What is the initial outlay associated with this project? Data Table $ (Round to the nearest dollar.) (Click on the following icon in order to copy its contents into a spreadsheet.) $6,300,000 Cost of new plant and equipment Shipping and Installation costs $100,000 Unit sales YEAR UNITS SOLD 1 2 3 80,000 125,000 145,000 70,000 70,000 4 5 Sales price per unit Variable cost per unit Annual fixed costs Working-capital requirements $270/unit in years 1 through 4, $220/unit in year 5 $150/unit $240,000 per year in years 1-5 There will be an initial working-capital requirement of $80,000 just to get production started. For each year, the total investment in net working capital will be equal to 15 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Bonus depreciation method, and as a result the bonus depreciation occurs in year 1, with no depreciation in any other years. If any losses occur, they would be offset by profits in other areas of the company Depreciation method Enter your answer in the answer box and then click Check Answer. 11 parts Check Answer remaining

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