Finance mini$-$case analysis:

A company is intending to invest in a capital budgeting project to manufacture a medical testing device and has projected the following sales:

Year $1$ Year $2$ Year $3$ Year $4$ Year $5$

$50,00066,40081,20068,50054,500$

The installed cost of the new assets will be $$18,500,000$ which will be depreciated using the $7-$year MACRS schedule. The assets will have a salvage value of $$3,700,000.$ Initial NWC requirements are $$1,500,000$ and additional working capital needs are estimated to be $15\%$ of the projected sales increases for the following year. Total fixed costs are $$2,000,000$ per year. The medical device has a selling price of $$300$ per unit and variable production costs are $$175.$ The firm has a marginal tax rate of $35\%$ and a required rate of return of $18\%.$ Analyze this project and give your recommendation as to whether they should invest in it or abandon it$.$

Questions:

Submit the $5$ year cash flows for this project $-$ do not forgot to start off with the initial NWC requirements at time zero and include the changes year on year $-$ till the final reversal in the terminal year.

o Include the ATSV in the terminal year

o Do you recommend the firm invest in this project? Why or why not?

TABLE $1$ MACRS Half$-$Year Convention Please provide a step by step instruction how to solve this problem, a similar question will be asked on the Final Exam.