As a financial analyst at Amazon, you are considering an investment in short horizon project that will better handle inventory in Amazon's shipping department. The inventory handling machine cost $1M and will last three years. The expected market price of the new machine at t=3 is $480,000. Amazon will depreciate the machine using straight-line method over 5 years to a zero value. The project will reduce expenses by $250,000 each year. Initial net working capital already in place at t=0 is $250,0000. The new machine will reduce the net working capital by $85,000 each year from t=0 to t=3. There are no other working capital effects, recoveries or otherwise. Asset betas of similar projects are 1.5. The expected market return is 12% and the risk-free rate is 3%. A bank will finance the debt portion of the project at 4.8%. The equity beta is 2.8. The tax rate is 21%

A. Assume that the project will maintain a constant debt to value ratio of 0.5. Calculate the NPV of this new project.

B. Next, change the assumption about the debt. Suppose that the bank makes a take it or leave it offer that the principal amount of the debt must follow the schedule: $500,000 at t=0; $350,000 at t=1; $200,000 at t=2; $0 at t=3. The firm accepts this deal. What is the NPV of the new project?

C. Next your boss tells you to calculate the NVP for (b) using after-tax WACC. Is there a short-cut (time-saving) way to the answer you can give her? If so, explain.