Let's break down the problem and calculate the value of the project: ## **Step 1: Calculate After-Tax Net Operating Cash Flows** From the table: - Net operating income each year = \$9.68 million - Income tax each year = \$3.388 million - Depreciation each year = \$2.4 million **After-tax net income:** = Net operating income - Income tax = \$9.68 million - \$3.388 million = \$6.292 million per year **Add back depreciation (non-cash expense):** = \$6.292 million + \$2.4 million = \$8.692 million per year This cash flow is the same for each of the 10 years. --- ## **Step 2: Calculate the Present Value of Cash Flows** - Annual cash flow: **\$8.692 million** - Number of years: **10** - Discount rate (cost of capital): **12%** The present value of an annuity formula is: \[ PV = C \times \frac{1 - (1 + r)^{-n}}{r} \] Where: - \(C\) = annual cash flow - \(r\) = discount rate = .12 - \(n\) = number of periods = 10 Plug in the values: \[ PV = 8.692 \times \frac{1 - (1+.12)^{-10}}{.12} \] Calculate \((1 + .12)^{-10}\): \[ (1.12)^{-10} \approx .322 \] So, \[ PV = 8.692 \times \frac{1 - .322}{.12} \] \[ PV = 8.692 \times \frac{.678}{.12} \] \[ PV = 8.692 \times 5.65 \] \[ PV \approx 49.155 \] --- ## **Step 3: Subtract Initial Investment** - Initial investment: **\$24 million** \[ \text{Value of project} = PV - \text{Initial Investment} \] \[ \text{Value of project} = 49.155 - 24 = 25.155 \text{ million} \] --- ## **Final Answer** **Value of project = \$25.155 million** (rounded to three decimal places) --- ### **How to Fill the Box:** ``` Value of project = $25.155 million ```