Brigid Co. has the following potential project: Machine price = $1,600,000; additional inventory requirement = $50,000. Cash flows will be generated at year end. Rev1 = $250,000 and grows at 5 percent each year for five years, while Cost1 = $100,000 and grows at 4 percent. At the end of the five-year project, the assets can be sold for $20,000, while the additional inventory that was tied up will be released. The applicable CCA rate land purchase and machine is 30 percent. The tax rate = 45%, and RF = 4.5%; project beta = 1.5; ERM = 9.5%. The ending UCC = $124,500.
Calculate the NPV of the project if the asset class remains open upon termination of the project. Decide whether or not Brigid Co. should accept the project.