LP's owners had been offering engine adaptor kits for some time but have recently decided to...

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LP's owners had been offering engine adaptor kits for some timebut have recently decided to begin building their own units. Tomake the adaptor kits the firm would need to invest in a variety ofmachine tools costing a total of ?$700,000. ?LP's managementestimates that they will be able to borrow ?$400,000 from the?firm's bank and pay 8 percent interest. The remaining funds wouldhave to be supplied by? LP's owners. The firm estimates that theywill be able to sell? 1,000 units a year for ?$1,300 each. Theunits would cost ?$1,000 each in cash expenses to produce? (thisdoes not include depreciation expense of ?$70,000 per year orinterest expense of ?$32,000?). After all? expenses, the firmexpects earnings before interest and taxes of ?$230,000. The firmpays taxes equal to 30 ?percent, which results in net income of?$129,000 per year over the 10?-year expected life of theequipment.The annual free cash flow LP should expect to receivefrom the investment in years 1 through 10 is? The anticipated NPVof the investment is?

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The following table shows the Free Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Net Income 129000 129000 See Answer

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LP's owners had been offering engine adaptor kits for some timebut have recently decided to begin building their own units. Tomake the adaptor kits the firm would need to invest in a variety ofmachine tools costing a total of ?$700,000. ?LP's managementestimates that they will be able to borrow ?$400,000 from the?firm's bank and pay 8 percent interest. The remaining funds wouldhave to be supplied by? LP's owners. The firm estimates that theywill be able to sell? 1,000 units a year for ?$1,300 each. Theunits would cost ?$1,000 each in cash expenses to produce? (thisdoes not include depreciation expense of ?$70,000 per year orinterest expense of ?$32,000?). After all? expenses, the firmexpects earnings before interest and taxes of ?$230,000. The firmpays taxes equal to 30 ?percent, which results in net income of?$129,000 per year over the 10?-year expected life of theequipment.The annual free cash flow LP should expect to receivefrom the investment in years 1 through 10 is? The anticipated NPVof the investment is?