Games Inc. is considering developing and marketing a new electronic game and has compiled the following product information.

Year Production cost Promotion cost Sales revenue

Year 1 $32,000 - -

Year 2 $32,000 $64,000 $64,000

Year 3 $32,000 $96,000 $256,000

Year 4 $32,000 $32,000 $128,000

Year 5 $32,000 - $32,000

Required:

1)Draw a detailed time line of all cash flows.

2)Calculate the NPV of the new electronic game product if the company requires a return of 16% on its investment. Show all calculations and calculator inputs.

3)Should the company proceed with this new product? Why or why not?