Food and Health Company is expanding and has an average-risk project under consideration. The company decides to fund the project in the same manner as the companys existing capital structure. The cost of debt is 9.00%, the cost of preferred stock is 12.00%, the cost of common stock is 16.00%, and the WACC adjusted for taxes is 11.50%. The estimation for the incremental cash flows for this project are presented below.

1. (NPV) of this project? Show all steps, workings, and formula(s) clearly. (6 marks)

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2. According to the NPV decision making rule, should this project be accepted? Why or why not? [Word limit: 30 words (answers beyond word limit will not be marked).] (2 marks)

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3. If the internal rate of return (IRR) of the project is estimated to be 11%, according to the IRR decision making rule, should this project be accepted? Why or why not? (2 marks)

#Incremental cash flows: Category TO T12 T24 T34 Investment $2,500,000 $250,000 INWC2 Operating Cash Flowe Salvage $750,000 $750,000 $250,000 $750,000 $50,000