In January 2020, right after the outbreak of the Covid-19 virus, Mr. and Mrs. Nice noticed the surging demand for hand sanitizers. As former chemists, they wondered if they could use ethanol to produce home-made hand sanitizers to help slow the spread of the virus and make some money.

They paid a consultant $1,000 and obtained some information related to the business. The consultant estimated the total initial investment to be around $15,000 which can be depreciated over the next two years using a straight-line method (that is, depreciation is $7,500 in each of the next two years). They also needed to set aside $10,000 for net working capital over the next two years. They planned to close the business after two years, because they expected vaccines to come out by the end of 2021.

Mr. and Mrs. Nice estimated the total earnings before interest and taxes (EBIT) to be around $80,000 per year. However, in order to start the business Mr. Nice would have to quit his part-time job and lose an after-tax annual salary of $50,000. The business would face a tax rate of 30%. Mr. and Mrs. Nice discounted future cash flows at 10% per year.

a. Please complete the working table below.

	Year 0	Year 1	Year 2
EBIT		_______	_______
Tax		_______	_______
Depreciation		_______	_______
Change in NWC	_______		_______
Investment	_______
Other CF (if any)	_______	_______	_______
Total CF	_______	_______	_______

b. Please calculate the NPV and payback period of this business.

c. Based on the numbers in (b), would the hand sanitizer business be financially beneficial for the Nice Family?