USA: +1(669)289-8683 
Sign in
following information describes
the new project: Cost of new plant and equipment
: $ 7,900,000 Shipping and installation costs: $ 100,000 Unit sales: Year Units Sold 1 70,000 2 120,000 3 140,000 4 80,000 5 60,000 Sales price per unit
: $300/unit in years 1–4 and $260/unit in year 5. Variable cost per unit: $180/unit Annual fixed costs: $200,000 per year Working capital requirements: There will be an initial working capital requirement of $100,000 just to get production started.
| Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? ( 5 Points) |
| What is the project’s initial outlay? ( 15 points) |
| Sketch out a cash flow diagram for this project. ( 10 points) |
| What is the project’s net present value? ( 10 points) |
| What is its internal rate of return? (10 points) |
| Should the project be taken on? (Explain your answer) ( 5 points) |
