Margies Bakery is considering a new product line of Wedding Cakes. Calculate the Payback periods and NPV for the project. Equipment Costs delivered and installed $600,000 Sales per year for the new Wedding Cakes $500,000 Variable Costs for the new wedding cakes, % of sales 30% Incremental fixed costs per year $ 50,000 Depreciation % per year, 33%, 45%, 15%, 7% Accounts Receivable increase in year 1 $20,000 Accounts Receivable decrease in year 4 $15,000 Inventory increase in year 1 $15,000 Inventory decrease in year 4 $10,000 Erosion is in only year 1: Sales erosion of current wedding cakes in yr 1 $50,000 Variable cost % for current wedding cakes 40% Tax Rate 40% NPV %s: 0 1.000, 1 0.8929, 2 0.7972, 3- 0.7118, 4 0.6355 Projects economic life 4 years Marketing study completed 2 months ago $10,000 Do you recommend proceeding with this project? 5 - Capital Budgeting