1. (25pt) A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $600,000, and the equipment costs $250,000. It is expected that the product will result in sales of $750,000 per year for 10 years. After 10 years, the land can be sold for $400,000, the building for $350,000, and the equipment for $50,000. Land is considered as non-depreciable assets, and the building and equipment could be depreciated with the straight-line (SL) method and the 100% DB method, respectively, for 10 years. The annual expenses for labor, materials, and all other items are estimated to total $475,000. The rms effective income tax rate is 20%. Assume that the after-tax MARR is 15% per year.

a) (10pt) Set up a table including annual depreciation deductions, taxable incomes, tax liabilities (or tax credits), and after-tax cash ows for this project.

With the obtained after-tax cash ows in a),

b) (5pt) Determine if the company should invest in the new product line using the NPV method.

c) (5pt) Determine if the company should invest in the new product line using the IRR method (use Excel IRR function).

d) (5pt) Determine if the company should invest in the new product line using the ERR method.