NEW PROJECT ANALYSIS ( 10 0 pts ) You must analyze a potential new product - a caulking compound that Cory Materials' R& D people developed for use in the residential construction industry . Cory's marketing manager thinks the company can sell 1 15 , 000 tubes per year at a price of $3 . 25 each for 3 years , after which the product will be obsolete . The required equipment would cost* $150 , 000 , plus another $ 25 , 000 for shipping and installation . Current assets ( receivables and inventories ) would increase by $35 , 000 , while current liabilities ( accounts payable and accruals ) would rise by $15, 000 . Variable cost per unit is $1 . 95 , fixed costs ( exclusive of depreciation ) would be $70 , 000 per year , and fixed assets would be depreciated under MACRS with a 3 - year life . ( Refer to Appendix 12 A for MACRS depreciation rates . ) When production ceases after 3 years , the equipment should have a market value of $ 15, 000 . Cory's tax rate is 40% , and it uses a 10% WACC for average - risk projects . a . Find the required Year O investment and the project's annual cash flows . Then calculate the project's NPV , IRR , MIRR , and payback . Assume at this point that the project is of average risk . b. Suppose you now low learn that R& D costs for the new product were $30 , 000 and that those costs were incurred and expensed for tax purposes last year . How would this affect your estimate of NPV and the other profitability measures ?" C . If the new project would reduce cash flows from Cory's other projects and if the new project would be housed in an empty building that Cory owns and could sell , how would those factors affect the project's NPV ?! d . Are this project's cash flows likely to be positively or negatively correlated with returns on Cory's other projects and with the economy , and should this matter in your analysis ? Explain