Daily Enterprises is purchasing a $5,000,000 machine. The machine will be depreciated using straight-line depreciation over its 6 year life and will have no salvage value. The machine will generate revenues of $10,000,000 per year along with fixed costs of $2,000,000 per year.

Marginal tax rate is 27%

a) If the discount rate is 14%, what is the NPV of the project? The cash flow each year is $6,065,000.

b) Should Daily accept or reject the project?

c) Find the Net Present Value Break-even level of revenues, assuming all costs are fixed costs.