Question $6[25$ marks$]$

We project unit sales for a new household$-$use laser guided cockroach search and destroy system as follows:

$\backslash$table$[[$Year$,$Unit Sales$],[1,53,000],[2,65,000],[3,76,000],[4,86,000],[5,46,000]]$

The new system will be price to sell at $$95$ each.

This project will require equipment costing $$585,000$ plus installation costs of $$15,000$ and working capital of $10\%$ of the first$-$year sales in dollars to start. The variable cost per unit is $60$ and total fixed costs are $$25,000$ per year. The equipment will be depreciated using the straight$-$line method with no residual value. The working capital that is required at the beginning of the project will be recovered at the end of the project. The plant will be sold at the end of the project for $$100,000.$ The company's tax rate is $35\%$ and its required rate of return for discounting purposes is $12\%.$

Required:

I. Determine the net cash flows associated with the project $[7$ marks$]$

II$.$ The project's net present value $[8$ marks$]$

III. The discounted payback period for the project. $[5$ marks$]$

IV$.$ Briefly compare the NPV with the Payback as decision making techniques. $[5$ marks$]$