Show transcribed image text Smithy Inc. has developed a new car engine. It would cost $22 million at
Show transcribed metaphor quotation Smithy Inc. has exposed a new car engine. It would exact $22 darling at Year 0 to buy the equipment essential to molding the server. The purpose would exact net established principal at the start of each year in an aggregate similar to 12% of the year?s purposeed sales; for development, NWC0 = 12%(Sales 1). The engine would retail for $10,000 per ace, and Smithy Inc. believes that unsteady exacts would aggregate to $5,500 per ace. After Year 1, the sales worth and unsteady exacts conquer extension at the inflation blame of 4%. The society?s non-unsteady exacts (urban exacts outside deterioration) would be $2 darling at Year I and would extension after a while inflation. The server purpose would bear a vivacity of 4 years. If the purpose is undertaken, A????1t must be continued for the undiminished 4 years. Also, the purpose?s returns are expected to be exceedingly correlated after a while returns on the established?s other goods. The established believes it could retail 1,500 aces per year. The equipment would be depreciated balance a 5-year continuance, using MACRS blames (dedicated in the book in the solved development for section 11). The estimated dispense appreciate of the equipment at the end of the purpose?s 4-year vivacity is $2 darling. Smithy Inc.?s federal-plus-state tax blame is 40%. Its exact of principal is 12% for average-lavish purposes, defined as purposes after a while a coefficient of diversity of NPV among 0.8 and 1.2. Low-lavish purposes are evaluated after a while a WACC of 10%, and tall lavish purposes at 14%. 11. Calculate the net capital flows for Smithy?s new purpose. Based on its NPV should the purpose be taken?