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Firm Z has invested $ 5 million in marketing campaign to assess the demand for the product Minish. This product will be in the market

Firm Z has invested $5 million in marketing campaign to assess the demand for the product Minish. This product will be in the market next year and will last five years. Revenues are projected to be $50 million per year along with expenses of $40 million. The firm spends $20 million immediately on equipment that will be depreciated using MACRS depreciation to zero. Additionally, it will use some fully depreciated existing equipment that has a market value of $6 million. Finally, Minish will have no incremental cash or inventory requirements (products will be shipped directly from the contract manufacturer to customers). But, receivables are expected to account for 10% of annual sales. Payables are expected to be 10% of the annual cost of goods sold (COGS) between year 1 and year 4. All accounts payables and receivables will be settled at the end of year 5. Based on this information and WACC in the first part of the question, find the NPV of the project. Identify the IRR of the project. Draw NPV vs r graph of the project. Will you accpet this project? Why? Please show your work. [30 points]
MACRS rates
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
0.20.320.1920.11520.11520.0576
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Cash
Inventory
Receivables
Payables
Net Working Capital
Change in Net Working Capital
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales
Cost of Goods Sold
Gross Profit
Selling, General and Administrative Expenses
Depreciation
EBIT
Tax
Incremental Earnings
Depreciation
Change in Net Working Capital
Capital Investment
Opportunity Cost
Incremental Free Cash Flow

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