Mana is a senior financial manager of Finder Relays, which produces electronic relays for domestic and international markets. She is conducting a capital budgeting analysis on a new product.

The facilities and equipment will cost $500,000. Finder will build the facilities on a piece of land it bought 5 years ago for $50,000. The land is currently valued at $150,000. Finder will depreciate the facilities and the equipment by the straight-line method to zero book salvage value over the 4 year life of the project. Finder will keep the land and the facilities at the end of the project, but Mana believes that they can sell the equipment at the end of 4 years for $50,000.

The new project is expected to generate yearly revenue of $400,000 p.a. The related variable costs are expected to be $110,000 p.a. and the relevant fixed costs are expected to be $25,000 p.a.

Finders required rate of return is 13% p.a. The relevant tax rate is 30% and tax is paid in the year in which earnings are received.

Calculate the tax effect and the incremental cash flows of the new project for each year (Y₀ to Y₄ inclusive).

Calculate the net present value (NPV) of the project. (Show answer correct to 2 decimal places.)

Calculate the present value index of the project. (Show answer correct to 4 decimal places.)

Explain if Finder should accept this project or not.