EC300 Homework 8 (Due date: Tuesday, October 10) Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $725,000 per year. The fixed costs associated with this will be $187,000 per year, and variable costs will amount to 20% of sales. The equipment necessary for production of the Potato Pet will cost $835,000 and will be depreciated in a straight line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial costs for the production. Pappy's is in a 40% tax bracket and has a required return of 13%. Calculate the payback period, NPV and IRR