Crane is considering a new project that will generate revenues of $18 million and operating costs (does not include depreciation or interest) of $7,000,000 annually for the next 4 years. It requires an additional machine that costs $20 million dollars that will be fully depreciated to a zero-book value on a straight line basis over 4 years. The machine can be sold for $2,000,000 at the end of the 4 years. Initial investment in net operating working capital (NOWC) is $6 million; there is no additional NOWV investment, but $1.2 million will be returned at the end of year 4. Tax rate is 25%. The cost of capital is 10%. Interest expense is $2 million per year.

1. a. Find the net present value (NPV) for the project.
2. b. Based on your answer to part a, should they accept the project? Explain.
3. c. How would the answer change if the machine could be expensed immediately? You do NOT need to rework the problem to answer this question.