Hi, Can you please help me to solve this question? The Forest Green Company is considering purchasing additional equipment that would have an initial cost of $500,000. They estimate it would add $250,000 to pre-tax revenues and variable operating expense (before taking account of depreciation) per year of 35%, for the first 4 years. In Year 5, they will cease production, and therefore will have no additional revenues or ongoing operating costs, but will incur one-time expense of $40,000 for severance pay (aside from depreciation).

The packaging machine will be depreciated on a straight-line basis, over 5 years, and will have no salvage value (ignore the MACRS depreciation methodology for this problem.)

Assuming a 19% marginal tax rate, and a 6.5% WACC, calculate the NPV of this investment.

Do you recommend this project? Why? USE THE FOLLOWING FORMAT TO ANSWER THE QUESTION: For calculating cashflows use this table format:

Revenues

-opcost

-Depr Expense

Oper. Income

-Tax

+Oper. Income

Depr Expense

operating cf

For Calculating npv, use the format of the below table and calculate npv using excel formula:

	Yr 0	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
Project A

Thanks!