Buckingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC$-750.$ The

cost of the XC$-750$ is $$2\mathrm{.}25$ million. Unfortunately, installing this machine will take several months and will partially

disrupt production. The firm has just completed a $$50,000$ feasibility study to analyze the decision to buy the $xC-750,$

resulting in the following estimates:

Marketing: Once the XC$-750$ is operating next year, the extra capacity is expected to generate $$10\mathrm{.}5$ million per year in

additional sales, which will continue for the $10-$year life of the machine.

Operations: The disruption caused by the installation will decrease sales by $$5$ million this year $($year $0).$ Once the

machine is operating next year, the cost of goods for the products produced by the XC$-750$ is expected to be $70\%$ of

their sale price. The increased production will require additional inventory on hand of $$2\mathrm{.}0$ million, to be added in year $0$

and depleted in year $10.$

Human Resources: The expansion will require additional sales and administrative personnel at a cost of $$2$ million per

year.

Accounting: The XC$-750$ has a CCA rate of $35\%$ and no salvage value is expected. The firm expects receivables from

the new sales to be $10\%$ of revenues and payables are expected to be $10\%$ of the cost of goods sold. Buckingham's

marginal corporate tax rate is $33\%.$

c$.$ If the appropriate cost of capital for the expansion is $12\%,$ compute the $NPV$ of the purchase $($including all CCA tax

shield effects$).($Hint: when calculating the NPV$,$ you should calculate the free cash flows excluding CCA tax shields then

add the PV CCA tax shields to get the NPV$.)$

d$.$ While the expected new sales will be $$10\mathrm{.}5$ million per year from the expansion, estimates range from $$8,400,000$ to

$$12,600,000.$ What is the NPV in the worst case? In the best case?

c$.$ If the appropriate cost of capital for the expansion is $12\%,$ compute the NPV of the purchase.

The NPV is $$.($Round to the nearest dollar.$)$