Clay Inc. is considering a new project. It requires a new machine that will cost $15,000,000. The new machine will be depreciated on a straight-line basis to a zero book value over 3 years. Sales will be $25,000,000 per year for 3 years. Variable costs are 68% of sales and fixed costs are $1,000,000 per year for 3 years. The tax rate is 40%. The horizon value is $14,000,000. To determine the cost of capital, Clay estimates a beta of 0.7. The risk-free return is 3% and the market risk premium is 10%. Variable and fixed costs do not include depreciation.

a. Find the net present value (NPV)

b. Should they consider the new line? Explain.