1. A company is considering launching a new product. The investment project has the following characteristics: Additional investments in the production line are estimated to be 1mln. These investments are to be linearly depreciated during the next 12 years. The company expects to close the project at the end of the 8th year and sell the equipment and the plant. The estimated cash ow from this sale is 400,000. In addition to CAPEX, the company will also have to invest in the working capital. The initial (time 0) investment in the working capital is 300,000, and it's expected to stay at 15% of sales each year (on top of the time 0 investments). Both the xed assets and the working capital are assumed to be sold at the end of year 8. The rst year sales are expected to be 5mln., with the sales growth rate decreasing linearly from 7% in the second year to 1% in the 8th. Production costs are 85% of sales. The new product is likely to compete with the existing main product of the company. As a result, the new product is expected to reduce company's EBIT from the existing one by 80,000 a year. In the absence of the project, these prots would have grown by 3% per year. Company's prots are taxed at 35%. Assume that the cost of capital is 12.5%. Calculate the NPV and IRR of the project