A manager at a consumer electronics firm is considering a 5-year project to improve its packaging process for cables and other accessories and reduce waste. The project requires a temporary product line to be set up in a warehouse that is currently rented out to a local distributor. The manager has collected the following information on the project:

• The project requires an immediate investment of $300,000 in new equipment. The equipment will have a 10-year economic life and will be depreciated straight-line to a salvage value of zero. After 5 years, the equipment can be sold for $100,000.
• The production line is expected to produce revenues of $600,000 per year (starting in year 1) and its operating cash costs are expected to be $270,000 per year.
• The rent the firm receives on its warehouse equals $150,000 per year. The current book value of the warehouse is $500,000 and the annual depreciation amount equals $10,000. The firm plans to sell the warehouse at the end of year 5 for $450,000, irrespective of whether the project will be undertaken.
• Operating the product line will require an immediate investment of $100,000 in Net Working Capital. The level of NWC will remain constant for the duration of the project.
• Since the project reduces waste, the firm can claim an immediate one-time tax credit of $20,000 if it sets up the product line.
• The manager has estimated that the relevant cost of capital for an investment of this type equals 12%. The marginal corporate tax rate for the electronics firm is 40%. Furthermore, you can assume that all cash flows are realized at the end of the year. Should the manager go ahead with the investment project? Show your calculations (hint: set up a cash flow template and first work out the Free Cash Flows of the project, and then calculate the project's NPV and IRR).