A company is considering the short-term production of materials to make learning finance fun for the whole family. It is a five-year project, with expected annual sales of $800,000 and about the same level of risk as the overall firm. Production equipment can be purchased for $700,000 and will require an additional $85,000 for delivery and installation. It is expected that the equipment, which will be depreciated using MACRS and is in the 5 year asset class (use the rates provided in the class notes), will be sold for $45,000 at the end of the five years when the project is complete. You believe operating costs will be 65 percent of sales and the project will require an initial $90,000 increase in net working capital.

The company just paid a dividend yesterday of $2.10 on its common stock, which has a beta of 1.4, with 8 million shares outstanding. Common dividends are expected to grow at a relatively constant 5 percent annually for the foreseeable future. The firm also has 1 million shares of 4.9 percent preferred stock outstanding, which currently trade at $44.10.

The company's bonds currently sell for 90.1 percent of their $1,000 par value. There are 100,000 of these 5 percent coupon bonds, which pay semiannually and mature on this date in the year 2040. The expected return on the market is 10 percent and the yield on 10 year U.S. Treasury securities is 4.2 percent. The firm has a 22 percent marginal tax rate. Based on the NPV rule, should you make this investment? (Show all work)