QUESTION 10 Grimm Inc. wants to develop a new RRH (Red Riding Hood) basket. The baskets will sell for $40 each and they plan to sell 10 million baskets at the end of each year for 2 years. Variable costs (cost of goods sold) are 40% of same year sales. Fixed costs (selling, general and administrative) are $20,000,000 per year. The project requires an additional machine that costs $120,000,000 to be depreciated on a straightline basis to a zero book value over 2 years. The machine has no salvage value. Net operating working capital (NOWC) is given in the table below. The tax rate is 30%. The interest expense on the project is $9 million. Depreciation and interest expenses are not included in the variable and fixed costs. This project ends, so there is no horizon value. If the cost of capital is 8%, find the net present value. Should they invest in the project? Explain. Please attach a file showing your work. Year 0 Year 1 Year 2 NOWC per year 5,000,000 6,000,000 0