Emery Communications Company is considering the production and marketing of a communications system that will increase the efficiency of messaging for small businesses or branch offices of large companies. Each unit hooked into the system is assigned a mailbox number, which can be matched to a telephone extension number, providing access to messages 24 hours a day. Up to 20 units can be hooked into the system, allowing the delivery of the same message to as many as 20 people. Personal codes can be used to make messages confidential. Furthermore, messages can be reviewed, recorded, cancelled, replied to, or deleted all during the same message playback. Indicators wired to the telephone blink whenever new messages are present.

To produce this product, a $1.75 million investment in new equipment is required. The equipment will last 10 years but will need major maintenance costing $150,000 at the end of its sixth year. The salvage value of the equipment at the end of 10 years is estimated to be $100,000. If this new system is produced, working capital must also be increased by $90,000. This capital will be restored at the end of the product's 10-year life cycle. Revenues from the sale of the product are estimated at $1.65 million per year. Cash operating expenses are estimated at $1.32 million per year. Required: 1. Prepare a schedule of cash flows for the proposed project. (Assume that there are no income taxes.) 2. Assuming that Emery's cost of capital is 12%, compute the project's NPV. Should the product be produced?

Required:
1.	Prepare a schedule of cash flows for the proposed project. (Assume that there are no income taxes.)
2.	Assuming that Emery's cost of capital is 12%, compute the project's NPV. Should the product be produced?

Two present value tables are provided: Present Value of a Single Amount and Present Value of an Annuity. Use them as directed in the problem requirements.

0.83602 0.49363 0.29586 0.25025 0.17986 0.05083 0.01801 18 0.70016 0.58739 0.41552 0.35034 0.21199 0.13004 0.09456 0.06914 0.03756 0.00889 0.27651 0.11611 0.05139 0.01441 0.00684 19 0.82774 0.68643 0.57029 0.47464 0.39573 0.33051 0.23171 0.19449 0.16351 0.08295 0.04308 0.03130 0.55368 0.17843 0.05139 0.01153 0.00526 20 0.81954 0.67297 0.45639 0.37689 0.31180 0.25842 0.21455 0.14864 0.10367 0.07276 0.03651 0.02608 21 0.81143 0.65978 0.53755 0.43883 0.35894 0.29416 0.24151 0.19866 0.16370 0.13513 0.09256 0.06383 0.04430 0.03094 0.02174 0.00922 0.00405 0.64684 0.52189 0.34185 0.18394 0.12285 0.00311 22 0.80340 0.42196 0.27751 0.22571 0.15018 0.08264 0.05599 0.03819 0.02622 0.01811 0.00738 0.63416 0.02222 0.40573 0.13778 0.11168 0.07379 23 0.79544 0.50669 0.32557 0.26180 0.21095 0.17032 0.04911 0.03292 0.01509 0.00590 0.00239 0.62172 0.31007 0.01883 0.01258 24 0.78757 0.49193 0.39012 0.24698 0.19715 0.15770 0.12640 0.10153 0.06588 0.04308 0.02838 0.00472 0.00184 25 0.77977 0.60953 0.47761 0.37512 0.29530 0.23300 0.18425 0.14602 0.11597 0.09230 0.05882 0.03779 0.02447 0.01596 0.01048 0.00378 0.00142 0.21981 0.05252 0.01352 26 0.77205 0.59758 0.46369 0.36069 0.28124 0.17220 0.13520 0.10639 0.08391 0.03315 0.02109 0.00874 0.00302 0.00109 0.58586 0.12519 0.02908 0.01818 0.00242 27 0.76440 0.45019 0.34682 0.26785 0.20737 0.16093 0.09761 0.07628 0.04689 0.01146 0.00728 0.00084 0.57437 0.15040 0.00971 0.00065 28 0.75684 0.43708 0.33348 0.25509 0.19563 0.11591 0.08955 0.06934 0.04187 0.02551 0.01567 0.00607 0.00193 0.10733 0.02237 29 0.74934 0.56311 0.42435 0.32065 0.24295 0.18456 0.14056 0.08215 0.06304 0.03738 0.01351 0.00823 0.00506 0.00155 0.00050 0.01165 0.30832 0.07537 0.05731 0.00038 30 0.74192 0.55207 0.41199 0.23138 0.17411 0.13137 0.09938 0.03338 0.01963 0.00697 0.00421 0.00124 A (1, i Present Value of an Annuity* 30 n/i 6% 9% 10% 14% 16% 18% 25% 1% 2% 3% 4% 5% 7% 8% 12% 20% 0.76 0.98039 0.95238 0.92593 0.91743 0.89286 0.86207 0.84746 1 0.99010 0.97087 0.96154 0.94340 0.93458 0.90909 0.87719 0.83333 0.80000 1.91347 1.78326 1.75911 1.73554 1.69005 2 1.97040 1.94156 1.88609 1.85941 1.83339 1.80802 1.64666 1.60523 1.56564 1.52778 1.44000 1.3609 2.62432 2.57710 3 2.94099 2.88388 2.82861 2.77509 2.72325 2.67301 2.53129 2.48685 2.40183 2.32163 2.24589 2.17427 2.10648 1.95200 1.8161 3.71710 3.38721 3.31213 2.79818 2.69006 4 3.90197 3.80773 3.62990 3.54595 3.46511 3.23972 3.16987 3.03735 2.91371 2.58873 2.36160 2.1662 4.71346 4.45182 4.21236 3.99271 3.88965 3.79079 3.27429 2.99061 2.68928 5 4.85343 4.57971 4.32948 4.10020 3.60478 3.43308 3.12717 2.4355 5.79548 5.41719 5.24214 6 5.60143 5.07569 4.91732 4.76654 4.62288 4.48592 4.35526 4.11141 3.88867 3.68474 3.49760 3.32551 2.95142 2.6427 5.20637 4.03857 3.60459 7 6.72819 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.03295 4.86842 4.56376 4.28830 3.81153 3.16114 2.8021 7.32548 7.01969 6.46321 5.33493 4.34359 4.07757 3.83716 3.32891 2.9247 8 7.65168 6.73274 6.20979 5.97130 5.74664 5.53482 4.96764 4.63886 7.10782 5.99525 5.32825 4.30302 3.46313 9 8.56602 8.16224 7.78611 7.43533 6.80169 6.51523 6.24689 5.75902 4.94637 4.60654 4.03097 3.0190 5.65022 10 9.47130 8.98259 8.53020 8.11090 7.72173 7.36009 7.02358 6.71008 6.41766 6.14457 5.21612 4.83323 4.49409 4.19247 3.57050 3.0915 9.25262 5.93770 5.45273 5.02864 4.32706 11 10.36763 9.78685 8.76048 8.30641 7.88687 7.49867 7.13896 6.80519 6.49506 4.65601 3.65640 3.1473 9.95400 9.38507 8.38384 7.53608 7.16073 6.81369 12 11.25508 10.57534 8.86325 7.94269 6.19437 5.66029 5.19711 4.79322 4.43922 3.72512 3.1902 7.90378 3.78010 13 12.13374 11.34837 10.63496 9.98565 9.39357 8.85268 8.35765 7.48690 7.10336 6.42355 5.84236 5.34233 4.90951 4.53268 3.2232 13.00370 12.10625 10.56312 9.29498 8.74547 5.00806 3.82408 14 11.29607 9.89864 8.24424 7.78615 7.36669 6.62817 6.00207 5.46753 4.61057 3.2486 3.2682 13.86505 9.71225 7.60608 5.09158 3.85926 15 12.84926 11.93794 11.11839 10.37966 9.10791 8.55948 8.06069 6.81086 6.14217 5.57546 4.67547 13.57771 8.85137 8.31256 6.97399 6.26506 3.2832 16 14.71787 12.56110 11.65230 10.83777 10.10590 9.44665 7.82371 5.66850 5.16235 4.72956 3.88741 10.47726 17 15.56225 14.29187 13.16612 12.16567 11.27407 9.76322 9.12164 8.54363 8.02155 7.11963 6.37286 5.74870 5.22233 4.77463 3.90993 3.2948 14.99203 12.65930 10.82760 8.75563 6.46742 18 16.39827 13.75351 11.68959 10.05909 9.37189 8.20141 7.24967 5.81785 5.27316 4.81219 3.92794 3.3036 7.36578 15.67846 8.36492 19 17.22601 14.32380 13.13394 12.08532 11.15812 10.33560 9.60360 8.95011 6.55037 5.87746 5.31624 4.84350 3.94235 3.3105 12.46221 11.46992 3.95388 20 18.04555 16.35143 14.87747 13.59033 10.59401 9.81815 9.12855 8.51356 7.46944 6.62313 5.92884 5.35275 4.86958 3.3157 CO 3.3198 18.85698 17.01121 15.41502 11.76408 5.38368 4.89132 14.02916 12.82115 10.83553 10.01680 7.56200 6.68696 3.96311 21 9.29224 8.64869 5.97314 3.3229 10.20074 6.01133 3.97049 22 19.66038 17.65805 15.93692 14.45112 13.16300 12.04158 11.06124 9.44243 8.77154 7.64465 6.74294 5.40990 4.90943 3.3253 11.27219 6.79206 6.04425 23 20.45582 18.29220 16.44361 14.85684 13.48857 12.30338 10.37106 9.58021 8.88322 7.71843 5.43212 4.92453 3.97639 12.55036 7.78432 4.93710 24 21.24339 18.91393 16.93554 15.24696 13.79864 11.46933 10.52876 9.70661 8.98474 6.83514 6.07263 5.45095 3.98111 3.3271 3.3286 22.02316 15.62208 14.09394 10.67478 9.07704 4.94759 3.98489 25 19.52346 17.41315 12.78336 11.65358 9.82258 7.84314 6.87293 6.09709 5.46691 3.3297 15.98277 9.92897 6.11818 4.95632 3.98791 26 22.79520 20.12104 17.87684 14.37519 13.00317 11.82578 10.80998 9.16095 7.89566 6.90608 5.48043 3.3305 23.55961 18.32703 14.64303 27 20.70690 16.32959 13.21053 11.98671 10.93516 10.02658 9.23722 7.94255 6.93515 6.13636 5.49189 4.96360 3.99033 13.40616 6.96066 3.3311 28 24.31644 21.28127 18.76411 16.66306 14.89813 12.13711 11.05108 10.11613 9.30657 7.98442 6.15204 5.50160 4.96967 3.99226 25.06579 21.84438 19.18845 6.98304 29 16.98371 15.14107 13.59072 12.27767 11.15841 10.19828 9.36961 8.02181 6.16555 5.50983 4.97472 3.99381 3.3316 3.3320 11.25778 30 25.80771 22.39646 19.60044 17.29203 15.37245 13.76483 12.40904 10.27365 9.42691 8.05518 7.00266 6.17720 5.51681 4.97894 3.99505 ((1) = (1.i)" $330,000.00 8 Total Year 6 $1,650,000.00 10 Revenues 11 0perating expenses (1,320,000.00) (150,000.00) 12 Major maintenance $180,000.00 13 Total Years 7-9 14 $(1,650,000.00) 15 Revenues (1,320,000.00) 16 Operating expenses $330,000.00 17 Total Year 10 18 $1,650,000.00 19 Revenues 20 Operating expenses (1,320,000.00) 21 Salvage 100,000.00 90,000.00 22 Recovery of working capital $520,000.00 23 Total 2(a) Assuming that Emery's cost of capital is 12%, compute the project's NPV. For discount factors, use the tables shown in Present Value Tables tab. Round the present value calculation and your final answer to the nearest whole dollar. If an amount is negative, first enter a minus sign (-). The NPV of the project is $ Incorrect. Please try again. Points: 0/1 2(b) Should the product be produced? Yes , the new product should be produced. Points: 2/2