JCrypt Corp is considering a project to create and sell tattoo inks containing tracking nanobots for states to apply on prisoners. The new service would require a capital expenditure for producing the nanobots in year 0 of $1,500,000 and have a service life of five years. The capital equipment would be depreciated on a straight-line basis over its service life (years 15) to a book value of zero. Operating income (EBIT), which includes COGS, Depreciation, and SG&A, for each of the five years would be $400,000. The capital equipment would have pretax salvage value of $40,000 at the end of its service life. Upfront operating expenses (initial OPEX) for production equipment to mix nanobots into tattoo inks would occur in year 0 and would be $800,000. An inventory of $25,000 in ink pods would be put in place in year 0. This inventory would return to zero at the end of the project's life. No other changes in net operating working capital are anticipated. The project's cost of capital (the company's weighted average cost of capital) is 12.5%. The company's annual tax rate is 21%.

Information summary

• Operating income: $400,000
• Tax rate: 21%
• WACC: 12.50%
• Project life: 5 years
• Initial CAPEX : $1,500,000
• Initial OPEX: $800,000
• Change in inventory: $25,000
• Pretax salvage value: $40,000

The net present value (rounded to the nearest whole dollar) of this proposed project is $ Blank 1. Fill in the blank, read surrounding text. .

*[Note: Do not use commas or spaces in your answer.]

Question 7 of 155 Points

The internal rate of return of this proposed project (rounded to two decimal places as a percentage) is Blank 1. Fill in the blank, read surrounding text. %. .

Question 8 of 155 Points

Based upon the net present value of this project, JCrypt Corp should ________ it.

• A. accept
• B. reject