Kraemer Company is launching a new product. The following information relates to the launch: 1) 4 year project life 8) Sales for first year $200,000 2) New equipment cost $(200,000) 9) Sales increase per year 5% 3) Equipment ship & install cost $(35,000) 10) Operating cost: $(120,000) 4) Related start up cost $(5,000) as a percent of sales -60% 5) Inventory increase $25,000 11) Depreciation expense $(60,000) 6) Accounts Payable increase $5,000 12) Tax rate -21% 7) Equip. salvage value after tax $15,000 13) WACC 10% Cash Flow Framework: Year 0 1 2 3 4 Investments: Total Operations: Revenue Operating Cost Depreciation EBIT Taxes Net Income Add back - Depreciation Total Terminal: Total Cash Flows $- $- $- $- $- NPV = IRR = Payback= Should Kraemer launch the new product? Why? How would you explain to your CEO (in business terms) what NPV means? Are you sure your NPV calculation 100% correct? What else should you do to help the analysis? How is the business risk accounted for in this project?