FX, Inc. is a volume manufacturer of high technology automotive mirrors (including cell link and voice activation). FX is looking to expand their operations to add a second product line capable of producing 1.3 Million units per year. The equipment investment cost for this new operation is $27 Million. The project falls under a 7 year MACRS class life and the company estimates that the salvage value will be $2.7 Million at the end of the 6 year project. The average selling price for each mirror is $85 per unit. The annual expected sales shown below:

Year	2020	2021	2022	2023	2024	2025
Volume (000)	600	750	1000	1200	1200	1200

The material cost for each mirror is $20 (with 25 % of the material imported from Canada and 35% from Mexico). The labor to produce each mirror is $15 with additional variable cost of manufacturing at $17 per unit. The fixed cost of manufacturing operations is $10 Million per year. FX maintains 1 month of raw materials and 1 month of WIP and finished goods combined to balance overall automotive demand. Assume that FX has a federal tax rate of 25% and a state tax rate of 5%. Also assume that FX uses a MARR of 15% for all economic analyses.

a) What is the NPV of the investment?

b) If the company could borrow $10 Million of the $27 Million needed at 10%, how would this change the NPV calculation?

c) If inflation is estimated at 2% and the pricing is locked for the six year period, how does your NPV change? Assume that the company borrowed $10 Million of the $27 Million needed at 10%.

d) Perform sensitive analysis on +/- 10% changes in volume, selling price, and material cost from part c. Graph your answers