Med-Tech (MT) is considering an expansion to its product line of nanites. The new addition would be specialized to the healthcare industry for the treatment of brain and nervous system related ailments.

1. Expected sales over the 3 year life of the project are: 8500, 23,000, and 20,000 units, priced at $80 per unit. A unit is defined as a batch of 20 thousand nanites.

2. Production of the new robots requires an investment of $1.3M in new equipment, which would be depreciated using MACRS 3 year asset class. MACRS rates below.

3. The expansion would use land purchased 5 years ago for $500k. The current market value of the land is estimated to be $570k. The projected market value of the property in 3 years is $580k.

4. For each period, required working capital is estimated to be 10% of next years sales.

5. Salvage value of the new equipment is projected to be $120k in three years.

6. MT has spent $400k in R&D and marketing research on the proposed expansion to date.

7. Fixed cash operating expenses would be $80k per year.

8. Variable cost per unit are estimated to be $20.

9. The marginal tax rate is 30%

10. RRR = 17%.

MACRS Depreciation Rates - 3 Year Recovery Period Year 1 2 3 4

Depreciation % 33.33 44.45 14.81 7.41

Determine the projects cash flows given the following information and then determine the NPV and IRR.