Assume that your assigned firm is considering a new 4-year project that would require a $1,000,000 initial investment in equipment including shipping and installation. The equipment would be depreciated using 3-year MACRS. 3-year MACRS allows firms to depreciate qualifying assets over four years at rates of 33.33%, 44.45%, 14.81% and 7.41% for years one through four respectively. The equipment can be sold at the end of the project for $250,000. Assume that the project would also require a $100,000 investment in net working capital. Your firm is forecasting that they would sell 10,000 units of the new product at $100 each in the first year and those sales would increase by 30% each year. Cost of goods sold on this new product would be 60%. Selling, general and administrative expenses to this investment are fixed at $250,000 per year. The firm's effective tax rate is -1.4. Using 12% as your firms estimated/required return, answer the following questions:

1) What is the NPV of this project?

2) What is the IRR of this project?

3) What is the payback of this project?

4) What is the discounted payback of this project?

5) Should the firm accept the project? Explain.

6) How does the hurdle rate (12%) compare to the firms ROE and ROA?