Project X involves a new type of machine used in manufacturing automobile dashboard frames. Your manager expects to sell 6,400 units per year at a price of $350 per unit. Variable cost will run at $200 per unit. Fixed costs for the project will run at $250,000 per year. This project will have a 3-year life.

The machine will cost $1,250,000 and will be depreciated using 5-year MACRS. After 3 years, the equipment is expected to be worth $400,000.

Year	MACRS Rate
1	20%
2	32%
3	19.2%
4	11.52%
5	11.52%
6	5.76%

Net working capital will increase initially by $150,000. The tax rate is 21% and the cost of capital is 14%. The table shows the 5-year MACRS rates:

a. Calculate the initial outlay for Project X.

b. Calculate the OCF for year 1

c. Calculate the net proceeds from the sale of the machine at the end of three years

d. Suppose the OCF for years 2 and 3 are $650,000 and $770,000, respectively. List all of the project cash flows or show them on a timeline.

e. Calculate NPV and IRR for Project X. Should this project be accepted. Please explain why or why not?

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