Jeff has an all$-$equity business of making healthy food. He is planning to invest with own money in an equipment which produces a healthy drink. With the new equipment, Jeff believes that he can expand his business. The cost of equipment is $$5,000,000.$ This investment can be depreciated for tax purposes using MACRS $3-$year depreciation schedule $(33\mathrm{.}33\%$ in year $1,44\mathrm{.}45\%$ year $2,14\mathrm{.}81\%$ year $3,$ and $7\mathrm{.}41\%$ year $4).$

Here is some information about the investment:

From the first $5$ years, the unit sales per year are expected to be $1,000,000$ units.

The sales price per unit is expected to be $$5$ and the cost of goods sold per unit are expected to be $$1.$

The new business requires to always keep $200,000$ units of inventory.

Fixed costs per year are expected to be $$1,000,000$ for the life of this business.

The business is expected to continue indefinitely. Detailed line$-$by$-$line forecasts are possible for the first $5$ years of the business life. Beyond that please assume that the business continues to operate and generate free cash flows, and that the long$-$term growth rate of free cash flows beyond that $5$ th year is forecast to be $2$ percent per year.

Corporate income tax rate is $21$ percent.

The cost of capital for this business is $10$ percent per year.

Assume net working capital start at $0$ and then is $15\%$ of sales for the life of the business.

Questions:

A$.$ What is the NPV of the project for the first $5$ years? $(20$ points$)$

B$.$ What is the IRR of this project? $(10$ points$)$

C$.$ What is the payback period of the project? $(10$ points$)$

D$.$ Should Jeff take the project if the threshold of "payback$-$rule" for go$/$no$-$go decision is $3$ years? $(10$ points$)$

E$.$ Based on these assumptions what is the terminal value of the project at the end of year $5?(10$ points$)$

F$.$ What is the total value of the business right after the $$5,000,000$ investment in new equipment is made? $(10$ points$)$

G$.$ Calculate the company's net profit margin in its first year. $(10$ points$)$

H$.$ Calculate the company's inventory turnover in its first year. $(10$ points$)$

I. Calculate the company's days' sales in inventory in its first year. $(10$ points$)$