Firm is evaluating the following project to install a new production facility. The production facility requires an investment in a machine costing 25,000 USD.

The machine will be fully depreciated according to the straight-line method. The life of the project is estimated to be 4 years. When the project is over, although the

book value of the machine is 0, you expect to sell the machine at a market value of 1,000 USD. The project also requires working capital in the amount of 10% of the following

year's sales revenue. (since the projected sales revenue stays the same, there is additional working capital only at t=0 and this will be recouped after the project is over at t=4.

From the project, you expect to sell 3,000 products each year during the project's life at the price of 80 per product. Production variable costs are estimated to be 70 USD per product

This project requires you to use the facility which is rented out with an after-tax rent cash inflow of 10,000 USD per year. if you proceed with the project, you can not receive the rent from t=1. among your staff, your firm currently employs workers. The annual salaries of the workers are 30,000 USD and you plan to continue to hire them, regardless of whether you do this project or not.

The company's cost of debt is 5%, cost of equity is 10%, the current capital structure is 20% debt. Tax rate is 30%.

1. What are the NPV and IRR for this project?

2. As a sensitivity analysis with respect to the production variable costs, what are the NPVs and IRRs when production variable costs (1) drops to 68 USD, and (2) increases to 72 USD?

3. Wheat is the break-even point of NPV=0 for the production variable cost?