RenK$2$ is currently evaluating a plan to introduce the action figure San Lolo. RenK$2$ plans to sell

the action figure for two years as the character's timeline in a popular movie franchise seems to

be ending. Below is some data for the current plan.

RenK$2$ has to purchase a machine for $$1,200,000$ that can only be used for San Lolo. Its

useful life is $2$ years and will be depreciated over the useful life to zero using straight$-$line

depreciation. This machine has to be paid in full at the beginning of year $1.$

There are additional fixed manufacturing costs of $$1,000,000$ per year $($salaries of

employees that need to be hired for the manufacturing of the figures$).$

RenK$2$ will not have to supply any working capital.

Per unit, RenK$2$ charges $$20$ and incurs $$10$ in variable manufacturing costs.

Assume that all cash flows $($other than the initial purchase of the machine$)$ occur at year$-$

end.

RenK$2$ has a cost of capital of $100\%($yes$,$ it is $100\%,$ this simplifies the calculations!$).$

c$)$ The CFO of RenK$2$ realized that the company can produce and sell the $1,000,000$ units

for year $1$ and then switch to a different character, Daisy Rey.

a$.$ RenK$2$ expects to be able to sell $1,000,000$ Rey figures year $2$ and another

$1,000,000$ Rey figures in year $3.$

b$.$ Each Rey figure will be sold at $$20$ and has $$5$ variable manufacturing costs.

c$.$ No additional investment will be necessary.

d$.$ Because the machine for production will not be useable in year $3,$ RenK$2$ plans to

produce $1,000,000$ San Lolo and $500,000$ Rey figures in year $1$ and produce

$1,500,000$ Rey figures in year $2.$

e$.$ As a result, instead of $$1,000,000$ in years $1$ and $2,$ RenK$2$ will face fixed

manufacturing costs of $$1,900,000$ in year $1$ and just $$900,000$ in year $2.$

f$.$ RenK$2$ will face no fixed manufacturing costs in year $3.$

In Year $2,$ RenK$2$ will first sell the $500,000$ units produced in year $1.$

RenK$2$ will allocate all manufacturing overhead costs to products based on variable

manufacturing costs.

What is the after$-$tax NPV for the entire project $($San Lolo and Daisy Rey$)$ if the CFO's

plan is implemented?