3. (25 points) A. Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.8 million. The marketing department predicts that sales related to the project will be $2.5 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of Goods Sold and operating expenses related to the project are predicted to be 25 percent of sales and 15 percent of sales, respectively. Howell also needs to add net working capital of 150,000 immediately. The additional net working capital will be recovered in full at the end of the project's life. The corporate tax rate is 35 percent. The required rate of return for Howell is 15 percent. Based on your estimate of NPV, should Howell proceed with the project? (20 points) How much would annual operating expenses have to decline (increase) to make the project NPV be equal to zero? (5 points) B