XYZ Inc. is cons

idering a project to

manufacture

2 million

boxe

s of

surgical

face masks

annually

for five years, for selling price of $20 per box. To get the project started, XYZ must invest $1

5

million in new plant and equipment. Annual fixed costs are estimated to be $6

million and variable

costs are estimated to be $12 per box. The CCA rate for the plant and equipment is 30%, and the

firm's marginal tax rate is 35%. After five years, the plant and equipment can be sold for an

estimated $2 million. XYZ estimates that net

working capital will increase by $

900,000 at the

initiation of the project

, and

90% of this amount will be recovered at the end of the project. What is

the project's net present value if the required rate of return on projects of similar risk is 16

%?

Should XYZ run this project? Assume all cash flows, except CCA tax shields, occur at the end of

the year.