Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.82 million. The marketing department predicts that sales related to the project will be $2.52 million per year for the next four years, after which the firm expects to sell it for $500,000. The machine is a five-year class asset and will be depreciated down to zero over five years under the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. Howell also needs to add net working capital of $200,000 immediately. The additional net working capital will be recovered in full at the end of the projects life. The corporate tax rate is 35 percent. The required rate of return (or discount rate) for the project is 12.5 percent.

Compute the NPV, IRR, and payback period of the project. The firms acceptable payback period is 3 years. Is this project acceptable to the firm?