You will complete a capital budgeting problem based on:

Cost of new equipment $14,800,000

Shipping and installation 200,000

Unit sales

Year 1 70,000

Year 2 120,000

Year 3 120,000

Year 4 80,000

Year 5 70,000

Sales price = $300 / unit in years 1-4 and $250/unit in year 5

Variable cost = $140 / unit

Fixed cost = $700,000 per year for all 5 years

Working capital : $200,000 at start of project, recovered at end

Depreciation = straight line over 5 years

Tax rate = 34%

Cost of capital = 15%

You must complete this project using an Excel spreadsheet.

Your assignment specifically:

1.Lay out the cash flows for years 1-5

2. Calculate the project NPV

3. Calculate the project IRR