FDC has decided to offer Unicorn Cookies. We paid, a non-refundable, $120,000 for a marketing survey to help us understand food trends prior to settling in on Unicorn as the next new cookie option. FDC thinks that the new cookie will generate $300,000 in incremental sales per year. Fixed costs will be $125,000 per year, and variable costs will be approximately 30% of sales (lots of food coloring). The capital investment in the equipment needed to produce the new cookies will cost $200,000 and will be depreciated in a straight-line manner for the 4 years of the cookies life (if you think unicorn will really last that long, I seriously hope it is already over). Assume no salvage value Net working capital will not be affected by this project (youre welcome). The firm has an average tax rate of 15% and a marginal tax rate of 21%. The required rate of return on projects with similar risk is 9%.

What if fixed costs decreased by 10%, And, now we have working capital to think about- working capital goes up by $10k (we need to increase working capital- purchasing additional supplies, etc. to start up the new investment) in time zero and Year 1 and then, as we ramp down, working capital decreases in years 3&4 also by 10k per year.

		Time ZERO	Year 1	Year 2	Year 3	Year 4
Cash Flow from Capital Investment
Changes in Working Capital
Cash Flow from Changes in Working Capital
Cash Flow from Ongoing Operations Annual Components:
Revenue
Fixed Expenses
Variable Expenses
Total Expenses
Total Cash Flow from Ongoing Operations
Depreciation
Taxes
After Tax Profit
Operating Cash Flow
Please evaluate the cash flows for the project and calculate the NPV
Discount rate

Total NPV calculation______________________

Whats the answer at discount rate of 5% (can you do this in less than 5 minutes?)