Case Study: You are evaluating a project for your company. Last year the Company spent $ 100,000 researching about the project. You estimate the sales price to be $500 per unit and sales volume to be 50 thousand units in year 1; 100 thousand units in year 2; and 90 thousands units in year 3. The project has a three-year life. Variable costs amount to $150 per unit and fixed costs are $500,000 per year. The project requires an initial investment of $25 million in assets which will be depreciated straight-line to 50 thousand over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $145,000. NWC requirements at the beginning of each year will be approximately 15 percent of the projected sales during the coming year. The tax rate is 21 percent. To finance this project, the company issued one million shares of common stock outstanding and selling at $ 21.5 per share and 5,000 bonds. The bond is offered at 5% coupon bond with 15 years to maturity and sold at 98 per cent (semiannual). The industry beta of similar firms is 1.59, the current risk-free rate is 3.09 percent, and the expected return on the market is 10.59 percent. Requirements:

1. Calculate the Net Present Value (NPV) of this project. Round the discount factor to the nearest 3 decimals.

2. Advise the company on the project and outline other factors that you would take into consideration in your decision.