Your company is evaluating a new product and you are required to provide a financial evaluation and recommendation

Marketing has given the following estimates:

Project Year $12345678$

Unit Sales $3,0005,0006,0006,5006,0005,0004,0003,000$

Selling Price per Unit $$120$ $$120$ $$120$ $$110$ $$110$ $$110$ $$110$ $$110$

Operations has given the following estimates:

VMC $$60$ per unit each year

Fixed Mfg Costs $$25,000$ each year

Working capital required for this project: $$20,000$ is required up front; subsequent years is estimated to be $15\%$ of $ sales

Cost of Machinery $$800,000$

Machine depreciated using $7-$years MACRS table $($provided on next tab$)$

Anticipate salvage value: $20\%$ of original cost of machine

Prior to start$-$up and caused by the installation of the new machine, production will be disrupted causing the loss of $500$ units selling for $$50$ with a VMC of $$30$

Info from the CFO:

Marginal tax rate: $21\%$

Required rate of return: $15\%$

Assume $0$ inflation

She has asked you to calculate the following and asked for your recommendation, accept or reject the project

NPV

IRR

Payback