**Questions:**

1. **What will be the tax depreciation each year? **Note: the total deprecation of tax purposes will still be $350 million if your calculations are correct.

2**.** Create an after-tax cash flow timeline similar to the one you did in Project 4.

3**. Calculate the new NPV and IRR**. **Should the Project be accepted?** The CFO thinks that the likely NPV and IRR will be close to the numbers that you calculated in Project 4.

**The following questions will be used to estimate risk.** **Please use Table 3 to calculate cash flow.**

4. The controller is worried about tax increases and estimates that the tax rate with be raised to 50% (federal and Maryland state) in year 4. Also there is a concern that expenses are understated. He asks, “What would happen to the NPV calculation if the cash tax expenses come in 2% higher than estimated and the tax rate increases to 50% in year 4?” This will allow a subjective evaluation of the project risk. **Calculate a new cash flow time line with cash expenses 10% higher than those in Table 2 and with a 50% tax rate.** **Use Table 3**

5. **What would be the net** **present value, NPV** **in this “worst case” cash flow?** **What will be the IRR?**

6. **Should the project be accepted? Discuss the risk and the reward to McCormick.**