Metropolitan Co$.($MC$)$ is considering adding a new product line to its portfolio. MC has already paid $$15,000$ for a location feasibility study that recommended install the new plant within the current unused space in MC$\text{'}$s main facilities. The machinery will have an invoice price of $$600,000$ but it requires another $$60,000$ to be installed. The machinery has an economic expected life of $4$ years but for depreciation purposes it will fall in the MACRS $3-$year class. An$.$ expected $$50,000$ salvage yalue has to be r$$cognized$.$ The new product line would generate incremental sales of $2,000$ units per year for the next $4$ years with an incremental cost of $$180$ per unit in the first year, excluding depreciation, and can be sold for $$340.$ The sales price and costs are expected to increase by $3\%$ per year due to inflation. To manage the new operation the MC$\text{'}$s net operating working capital would have to increase by an amount equal to $10\%$ of sales revenues. Firm's tax rate is $35\%$ and its overall weighted average cost of capital is $12\%.$

$5.$ Even base case estimation is considered reliable; MC$\text{'}$s management is assessing a $25\%$

chance of better than expected product acceptance and a $25\%$ chance of worse than expected product acceptance. A poor acceptance will imply a reduction of $30\%$ in sales at a reduced unit price of $$330$; a strong consumer response will increase sales by $25\%$ with a unit price of $$360.$

a$.$ Determine expected NPV$,$ standard deviation and coefficient of variation of this project.

b$.$ MC$\text{'}$s average project has a coefficient of variation in the range of $0\mathrm{.}3$ to $0\mathrm{.}6.$ What would be your analysis and recommendations for this project?