Assumptions:

1. The life of the project is expected to be 5 years. Please assume that the analysis is taking place at the end of 2021. 2022 will be the first year of operation.

2. T-shirt Corp. needs to invest in a machine that would print designs on the t-shirts. The machine costs $10,000 and will be depreciated fully using a straight line method over 10 years. At the end of 2023, the machine will be sold for $2,000.

3. The projected sales are:

	2022	2023	2024	2025	2026
Number of t-shirts	2,000	3,000	4,000	5,000	6,000

4. The price of a t-shirt will be $15 in 2022 and will increase by 3% per year in the following years.

5. The cost of goods sold for one t-shirt will be $6 in 2022 and will remain the same in the following years.

6. The company will rent a store to run its operations. The rent and utilities is expected to cost $10,000 in 2022 and will increase by 2% each year afterwards.

7. In order to run the t-shirt venture, the Balanced Corp. will need to have 10% of the following years sales in its net working capital account.

8. Balanced Corp. will spend $5,000 for marketing each year starting in 2022.

9. The company spent $5,000 for market research in 2020.

10. Tax rate (federal plus state) is 25%.

11. The cost of capital for this project is estimated to be 12%. As a part of cost of financing, the company will have $1,000 in interest expenses each year.

Please analyze this project and provide advice to Balanced Corp. Should the students start the t-shirt venture? Please report and discuss the NPV, IRR and Payback Period for the venture when answering this question.