Buckingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC$-750.$ The cost of the XC$-750$ is $$2\mathrm{.}75$ million. Unfortunately, installing this machine will

take several months and will partially disrupt production. The firm has just completed a $$50,000$ feasibility study to analyze the decision to buy the XC$-750,$ resulting in the following estimates:

Marketing: Once the XC$-750$ is operating next year, the extra capacity is expected to generate $$10\mathrm{.}0$ million per year in additional sales, which will continue for the $10-$year life of the machine.

Operations: The disruption caused by the installation will decrease sales by $$5$ million this year. Once the machine is operating next year, the cost of goods for the products produced by the $750$

is expected to be $70\%$ of their sale price. The increased production will require additional inventory on hand of $$1\mathrm{.}0$ million, to be added in year $0$ and depleted in year $10.$

Human Resources: The expansion will require additional sales and administrative personnel at a cost of $$2$ million per year.

Accounting: The XC$-750$ has a CCA rate of $45\%$ and no salvage value is expected. The firm expects receivables from the new sales to be $15\%$ of revenues and payables to be $10\%$ of the cost of

goods sold. Buckingham's marginal corporate tax rate is $35\%.$

e$.$ If the appropriate cost of capital for the expansion is $10\%,$ what is the NPV break$-$even level of new sales for the expansion? What is the NPV break$-$even level for the cost of goods sold?

f$.$ Buckingham could instead purchase the XC$-900,$ which offers even greater capacity. The cost of the XC$-900$ is $$4$ million. The extra capacity would not be useful in the first two years of operation,

but would allow for additional sales in years $3-10.$ What level of additional sales $($above the $$10\mathrm{.}0$ million expected for the XC$-750)$ per year in those years would justify purchasing the

larger machine?

e$.$ If the appropriate cost of capital for the expansion is $10\%,$ what is the NPV break$-$even level of new sales for the expansion?

The break$-$even level of sales of the expansion is $$20563111.($Round to the nearest dollar.$)$