1. Delicious Snacks, Inc. is considering adding a new line of candies to its current product line. The company already paid $300,000 for a marketing research study that provided evidence about the demand for this product at this time. The new line will require an additional investment of $70,000 in raw materials to produce the candies. The projects life is 7 years and the firm estimates sales of 1,500,000 packages at a price of $1 per unit the first year; but this volume is expected to grow at 17% for the next two years, 12% for the following two years, and finally at 7% for the last two years of the project. The price per unit is expected to grow at the historical average rate of inflation of 3%. The variable costs will be 70% of sales and the fixed costs will be $500,000.

The equipment required to produce the candies will cost $900,000, and will require an additional $30,000 to have it delivered and installed. This equipment has an expected useful life of 7 years and will be depreciated using the MACRS 5-year class life. After 7 years, the equipment can be sold at a price of $200,000. The cost of capital is 9% and the firms marginal tax rate is 35%.

a) Calculate the initial investment, annual after-tax cash flows for each year, and the terminal cash flow.

b) Determine the NPV, IRR, and MIRR of the new line of candies. Should the firm accept or reject the project?

Please full out the excel file below exactly and show formula.

MACRS PERCENTAGES BY CLASS LIFE Year 5-Year 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76% Increase in Raw Materials First Year Number of Units Year 1 Price per Unit Unit Price Increase (Expected Inflation) Unit Sales Growth Rate #1 Unit Sales Growth Rate #2 Unit Sales Growth Rate #3 Variable Cost per Unit Annual Fixed Costs Cost of Equipment Installation & Delivery Costs Project's Life (Years) MACRS Class Salvage Value WACC Marginal Tax Rate 70,000 1,500,000 S1 3% 17% 12% 7% 70% $500,000 $900,000 $30,000 7 5 $200,000 9% 35% Delicious Snacks, Inc.'s Operating Cash Flow Statement 1 2 3 0 4 5 6 7 Year Expected Price per Unit Expected Number of Units Revenue Variable Cost Fixed Cost Depreciation Pre-Tax Cash Flow Taxes Add: Depreciation Increase in Raw Materials Capital Spending Terminal Cash Flow After-Tax Cash Flows Net Present Value (NPV) Internal Rate of Return (IRR) MIRR MACRS PERCENTAGES BY CLASS LIFE Year 5-Year 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76% Increase in Raw Materials First Year Number of Units Year 1 Price per Unit Unit Price Increase (Expected Inflation) Unit Sales Growth Rate #1 Unit Sales Growth Rate #2 Unit Sales Growth Rate #3 Variable Cost per Unit Annual Fixed Costs Cost of Equipment Installation & Delivery Costs Project's Life (Years) MACRS Class Salvage Value WACC Marginal Tax Rate 70,000 1,500,000 S1 3% 17% 12% 7% 70% $500,000 $900,000 $30,000 7 5 $200,000 9% 35% Delicious Snacks, Inc.'s Operating Cash Flow Statement 1 2 3 0 4 5 6 7 Year Expected Price per Unit Expected Number of Units Revenue Variable Cost Fixed Cost Depreciation Pre-Tax Cash Flow Taxes Add: Depreciation Increase in Raw Materials Capital Spending Terminal Cash Flow After-Tax Cash Flows Net Present Value (NPV) Internal Rate of Return (IRR) MIRR