char.

Five Stars Inc., is considering a new four$-$year expansion project that requires an initial fixed asset investment of $4\mathrm{.}5$ million. The fixed asset falls into the five$-$year MARCRS class and will be depreciated over its four$-$year tax life. Also, the fixed asset will have a market value of $$310,000$ at the end of the project. The project is estimated to sell the new product for $10,000$ units a year and the price per unit is $$265.$ The variable cost is $$84$ per unit and the fixed cost is $$80,000$ a year. Suppose the project requires an initial investment in net working capital of $$300,000$ and the net working capital will be fully recovered at the end of the project. If the tax rate is $21\%$ and the required rate of return on the project is $12\%,$ what is the project$$s NPV$?$

Five$-$year MACRS

Year MACRS Percent

$120\mathrm{.}00$

$232\mathrm{.}00$

$319\mathrm{.}20$

$411\mathrm{.}52$

$511\mathrm{.}52$

$65\mathrm{.}76$