can you also explain if

pappy should continue with the project or stop, and why?

22. Calculating Project Cash Flows and NPV Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $ 120,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $835,000 per year. The fixed costs associated with this will be $ 204,000 per year, and variable costs will amount to 20 percent of sales. The equipment necessary for production of the Potato Pet will cost $865,000 and will be depreciated in a straight- line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 23 percent and a required return of 13 percent. Calculate the payback period, NPV, and IRR. Alor HOW_ECH.Chester 09 Student template 21118. Page Layout Form www Oment SGC GI A B C D 40 4 Inout area $ 3 $ 10 11 12 Marketing study Sales/year Fixed costs Variable costs of sales) Equipment Product Tax rate Required return $ 120,000 $35.000 204.000 20% 365.000 4 23 13 14 Output area HE HA WO 1 1 w FO Sales ble costs Fixed cost Depreciation EBT Tax 123%) Net income $ 1 NAT 1 5 1 1 Operating cash flow 23 14 25 En 27 En 20 30 30 33 23 34 OCH INI 1 Payback penod NPV IRR web 1 1 5 1 3 3 3 paytar 1 oc 5 ment 22 $0 $0.00 NPV less Invest NPV $ $ A A $ $ IRR #NUMI $ $ $ Payback Payback $ $ $ #DIV/01