Company ABC is considering the purchase of a $5,000 souffle maker, which has a life of 5 years and will be fully depreciated by the straight-line method. The machine will produce 2,000 souffles per year, with each costing $2 to make and priced at $4. In order for the machine to work, and increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 5. The used souffle maker can be expected to sell at $1,000 five years later.

Company ABC has 3-year bonds outstanding. The bonds coupon rate is 8% and it is selling at $950. The total value of the bonds is $10M. The common stocks of the company are worth $30M. The beta of the common stock is 1.5, the market return is 14%, the risk free rate is 6%, and the firms tax rate is 40%

Assume that the firm is profitable, and the tax rate is 40%. Should the firm do the project? (NPV, IRR)