Calculations must be done in Excel - You must create your own spreadsheet (do not copy and paste someone else's). This question should be done using Method 1 as outlined in lecture 6 (i.e. Tax Effects, then Cash Flows then NPV).

Happy corporation projects their future unit sales for a new headphone. The projected unit sales are as below.

	1	2	3	4	5
Unit sales	75000	89000	120000	96000	60000

To produce the headphones, the initial net working capital of $2,000,000 is required and additional net working capital is also required each year, which is 20% of the projected sales increase for the following year. The net working capital will be recovered at the end of a project. In addition, the initial installation cost of the machine for production is $21,000,000. The machine will be depreciated for tax purposes using straight-line depreciation with the useful life of 8 years. Also, costs and unit price are as below.

Fixed cost	$3,120,000 per year
Variable cost	$285 per unit
Price	$415 per unit

In five years, the machine can be sold for about 30% of its acquisition cost. The tax rate is 30% and the required rate of return is 15%.

Tasks

What is the NPV of the project? Explain and defend your processes, answer, and calculations clearly.