Big Red Manufacturing is planning to purchase a new machine. The machine costs $$1\mathrm{.}8$M and has a

useful life of $10$ years. The firm uses straight line depreciation to depreciate all assets. The firm

projects revenues from the machine to be $$6\mathrm{.}2$M per year and to increase slightly faster than inflation,

at $5\%$ per year. Manufacturing costs are $90\%$ of revenue. If the machine were not purchased, Red

Manufacturing Co could lease out the vacant factory space at a rental cost of $$200$K per year. Red

Manufacturing Co projects that they can increase the rental fee by $4\%$ each year due to inflation. The

firm suspects they will need to end production in year $8,$ thus putting the now$-$used equipment up for

sale and expect to be able to sell the equipment for $$600$K at the end of that year. Additionally, the

firm anticipates they will need to build inventory levels ahead of production, and so will need initial

working capital $$ the initial WC need is $$450$K$,$ and they expect that working capital annual needs are

$10\%$ of annual revenue $.$ The tax rate of the firm is $25\%$ and the firm$$s required rate of return is $12\%.$

What is the NPV of this project, and should the firm proceed or abandon the machinery expansion $?$

What is the IRR of this project? Please upload the excel file with work