ABC Company is examining a new capital-investment proposal that would greatly increase the production of diapers. The proposal involves an investment in some machines that would increase the firm's efficiency at producing and preparing for export the top-quality Diapers for which the region has become well-known. The purchase price of this machinery is $750,000 and installation costs would total $60,000. The equipment would have a useful life of 5 years and, for tax purposes, depreciation charges would be according to the 7-year-asset MACRS schedule. The machinery cost and the installation costs should be capitalized at t=0 and fully depreciated using the MACRS schedule. Interest charges associated with this investments financing have been estimated at approximately $70,000 per year, for each year of the project's estimated useful life. Management expects the machinery to be sold for a scrap value of $117,000 at the end of year 5. Ramon Rodrigez, the firm's accountant, pointed out that the portion of the factory that would house this new equipment machinery underwent a major 'renovation' 15 months ago with a total cost of $105,200. Because the project would not have been feasible without the renovation, Ramon suggests that the costs of the renovation should be allocated to the project as one of its initial expenses. The incremental sales (revenues) projections for this investment are shown near the end of this problem statement. Variable operating costs, excluding depreciation, are projected to be 40% of same-year sales. Incremental fixed costs (for maintenance, etc.) are projected to be $25,000 in the first year. For each of the remaining years of operation, this fixed-cost component is projected to increase by 2% per year. If the new machinery is purchased, some of ABC Net Working Capital (NWC) accounts will be affected. The schedule near the end of the problem statement shows balances for Accounts Receivable, Inventory, and Accounts Payable across the projects life. Of course, youll need to use this information to build the NWC Tracker, which in turn feeds into the Net Working Capital term in the cash-flow worksheet. The Chief Financial Officer of ABC Company, Sam Sand, requests your assistance in preparing an analysis of the net cash flow projections for the proposed investment. Sam believes that the systematic risk of this project is similar to the average systematic risk of other ABC projects. Sam also indicates that 30% is the appropriate tax rate for this entire analysis. You also have the following information: The firm has 15 million shares of common stock outstanding that are trading for $19.20 per share. The current yield to maturity on 10-year Treasury Bonds is 3.00%. ABC's equity beta = 1.4. The market risk premium = 6.2254%. The firm's bonds have a 6.5%/yr. coupon rate, have a $1,000 face value, pay semi-annual coupons, and mature in 15 years. There are 100,000 bonds outstanding and they currently sell in the open market for $960.00 per bond. Sales projections are these for years 1-5: $300,000, $420,000, $510,000, $600,000, and $480,000. The MACRS depreciation schedule for a 7-year asset is as follows: year 1: 14.29%; year 2: 24.49%; year 3: 17.49%; year 4: 12.49%; year 5: 8.93%; year 6: 8.92%; year 7: 8.93%; and year 8: 4.46%. Next, here is the schedule for the various working-capital accounts that will be affected if the project is undertaken:

time	0	1	2	3	4	5
Account Recievable	0	27000	39000	45000	51000	0
Inventory	33000	45000	60000	60000	45000	0
Account payable	21000	25200	30000	30000	16800	0

Question:Sam has requested that you (1) identify all of the cash flows for this project, (2) using the weighted-average cost of capital as the discount rate, report the project's NPV and IRR, and (3) provide your recommendation regarding whether the project should be accepted or rejected. The details of your cost of capital calculations and cash-flow projections should be clearly presented.