Fresnel Enterprises, Inc. is embarking on a new venture with a partner manufacturing company China. Fresnel has designed a new line of screen guards for smartphones that not only protect screens, but also act as a magnifying glass. They expect the new screen guards to be particularly popular with retirees in the United States, so are already planning a marketing campaign targeting the Florida and Arizona markets.

However, while Fresnel can manage design, marketing, and distribution in the United States, they have little manufacturing expertise. So they have hired a contract manufacturer in China to handle actual production. Fresnel will supply the initial investment dollars needed to set up the production and assembly lines in China, and then pay their partner a modest fee for each unit produced. Since they are handling distribution, there will also be some working capital investments required.

Fresnel is planning a 5-year time horizon for this project. At the end of year 5, the company will liquidate the assets from the project. All assets will have been fully depreciated. A list of facts and assumptions, including sales forecasts for the life of the project, are given in the tables to the right. =======>

Provide a financial analysis of this project to help determine if it should be pursued:
a) Using the information provided, create simple income statements for each year of the project. Calculate the annual Operating Income (EBIT) and Net Income.
								b) Create an analysis of the Working Capital needs and changes for each year (see the table at the top of page 263 of the textbook for an example).
c) Determine the Free Cash Flow for each year of the project.
d) Calculate the project's NPV, BCR, and IRR.
e) Based on your analysis, very briefly explain whether this project should be pursued and why.

	Design Costs, Already Incurred to Date				$150,000
	Initial Cost of Equipment				$675,000
	Annual Depreciation on Equipment				$135,000
	After-Tax Salvage Value of Equipment Year 5				$65,000
	Annual Selling and Adminstrative Expenses				$95,000
	Production Costs (% of Sales)				35%
	Working Capital Investment (% of Sales)				25%
	Effective Tax Rate (% of Taxable Income)				21%
	Required Return (%)				12%

	Sales Projections
	Year One	$250,000
	Year Two	$650,000
	Year Three	$850,000
	Year Four	$800,000
	Year Five	$450,000