6. Summer Tyme, Inc., is considering a new three-year expansion project that requires an initial fixed

asset investment of $3.9 million. The fixed asset falls into the three-year MARCRS class and will be

depreciated over its three-year tax life. The project is estimated to generate $2,650,000 in annual sales,

with costs of $840,000. Suppose the project requires an initial investment in net working capital of

$300,000 and the net working capital will be fully recovered at the end of the project. Also, the fixed

asset will have a market value of $210,000 at the end of the project. Suppose that the tax rate is 21%

and the required rate of return on the project is 12%. What are the project's NPV and IRR? Should

the firm accept this project?

7. Dog Up! Franks is looking at a new sausage system with an installed cost of $560,000. This cost will

be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage

system can be sold for $85,000 in the market. The sausage system will save the firm $165,000 per

year in pretax operating costs, and the system requires an initial investment in net working capital of

$29,000. If the tax rate is 21% and the required rate of return of the project is 10%, what is the NPV

of this project?