If the opportunity cost of capital, npv irrIf the opportunity cost of capital, npv irr

3. The Colorado Brewing Company is considering producing a new beverage. This beverage project requires an initial investment (i.e., at t=0) in equipment of $300,000. At t=3, the company plans to sell the equipment for $5,000. The equipment can be depreciated according to the three year Modified Accelerated Cost Recovery System (MACRS) schedule, which allows depreciation of 33.33% at t=1, 44.45% at t=2, 14.81% at t=3, and 7.41% at t=4. Depreciation will be based solely on the initial cost of the equipment (i.e., when calculating depreciation, ignore any salvage value). This project is expected to produce sales revenue of $400,000 the first year (i.e., at t=1); this revenue will increase by 20% per year over the next two years (i.e., t=2 and t=3). Manufacturing costs are estimated to be 60% of sales. A key marketing study was completed last year; the cost of this study was $50,000. The project requires an investment in working capital. Specifically, at each point in time, working capital must be maintained at 10% of next year?s forecasted sales revenue. Working capital will be fully recovered at t=3. The corporate tax rate is 35%. The company?s tax situation is such that it can make use of all applicable tax shields and deductions. If the opportunity cost of capital is 16%, is this a good project or a bad project