INCO Holding is considering selling one of its old factories for $6 million and using the money to finance investing in consumable paper products. INCO has an agreement with NBB bank to finance any additional investments at a rate of 20.0% per year. Due to a fierce market competition, the expected demand on such product (which is a packet of 500 card cups) is 1,400,000 products per year. It is expected to increase by 3% per year for the 1st 10 years then it will decrease by 2% each year from year 11 to year 20, this is due to the introduction of new products. Each product can be sold to distributors for USD 2.25 in the 1st 10 years then it decreases to 1.95 in the last 10 years. Raw material price is USD 0.35 per piece and increases yearly by USD 0.015. A production system can be purchased and installed with the USD 4 Million budgeted. It has a production capacity of 250 000 products per month. This model is expected to last for 20 years. According to the recommendation of the producer. Labor cost per product is USD 0.35, whereas overhead is about USD 0.95 per product, the overhead includes electrical power consumption, support staff and other expenses. The production system is depreciated using the declining balance method with a depreciation rate 12% per year. It is expected to be sold for USD 400,000 at the end of its life (20 years). The main supplier of raw material requires that the payment should be at most after (accounts payable) 1 month. Due to the competitive market a minimum of 1 month of raw material and finished products are to be maintained in inventory. Customers on the average pay for their purchased products after 1 month (accounts receivable). The group will start production next year. They will use the current year for installation and preparation and training. Assume a tax rate of 2.5%. The group will build a warehouse to store raw material and finished products. It is estimated to cost $3.4 Million. The warehouse operating cost is 90,000 per year for labor, equipment and overhead. It can be sold at the end of 20 years for about USD 0.5 Million at the end of its life. Use the straight-line method to compute the warehouse depreciation. 1. Develop the project cash flow to determine: a. Working Capital needed b. Compute the depreciation for both the production line and the warehouse then use their aggregate value in cash flow c. Return on Investment d. NPW e. Payback period, discounted payback period (in Excel Sheet)