Cash Flow Estimation Salvage Value: XYZ Corporation is considering an expansion project. To date they have spent $62,600 investigating the viability of the project and have decided to proceed. The CEO of XYZ spent $17,800 last year on his business trip to New York where he discussed about the proposed new project with the board members. The company spent $51,000 on a marketing study before its current analysis regarding whether to accept or reject the project. The proposed project will cost $600,000.00. The project will be depreciated over a 3 year MACRS class life. XYX would use the 3-year MACRS method to depreciate the machine and equipment which are 33.33%, 44.45%, 14.81%, and 7.41%. If the project is undertaken the company will need to increase its inventories by $30,800, and its accounts payable will rise by $7,900. The company will realize an additional $560,450.00 in sales over each of the next three years. The company’s operating costs (not including depreciation) will increase by $282,886.00 a year. Both sales and the operating cost are expected to grow 6.50% annually during the life of the project. The company’s tax rate is 35.00%. At t = 3, the project’s economic life is complete, but it will have a salvage value (before-tax) of $95,500.00 after three years. The project’s WACC is 16.25%. What is the project’s net present value (NPV)? Using information in # 14, answer the following questions (show your work in details here): (You may work in Excel and Paste your work here. However, format Excel worksheet (check my format excel file video) before pasting your work here). a. What is the Year 0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital – also called terminal value)? d. What is the NPV of the project? e. Should the machine be purchased?