DrillOng Sdn Bhd has developed a powerful new hand drill that would be used for woodwork and carpentry activities. It would cost $1 million to buy the equipment necessary to manufacture the drills, and it would require net operating working capital equal to 10% of sales. It would take 1 year to buy the required equipment and set up operations, and the project would have a life of 5 years. If the project is undertaken, it must be continued for the entire 5 years. The firm believes it could sell 6,000 units per year. The drills would sell for $250 per unit, and DrillOng believes that variable costs would amount to $180 per unit. The companys fixed costs would be $110,000 at Year 1 and would increase with inflation. After the first year, the sales price and variable costs will also increase at the inflation rate of 3%. The equipment would be depreciated over a 5-year period, using the straight-line method. The salvage value of the equipment at the end of the projects 5-year life is $50,000. The company however estimated the machine can be sold as scrap for RM60,000. The corporate tax rate is 25%. The projects returns are expected to be highly correlated with returns on the firms other assets. The cost of capital is 12%.

Develop a spreadsheet model and use it to find the projects NPV, IRR, and payback.