Please calculate Part III and Part IV

AAA Health, Inc. (NYSE: A3H) is evaluating a new product, a vitamin C}fish oil blended energy drink. As an assistant director of the capital budgeting division of AAA Health, yoy are responsible for the evaluation of the proposed project. You collected the following information about the project and the cost Of capital. You should make an accept./reject recommendation to the director of your division based on your evaluation, Information about the Proposed Project Initial investment and depreciation: The new drink would be produced in an unused building (owned by AAA Health). which is fully depreciated. The new equipment required for the project woild cost S500,000, plus an additional for shipping and installation. With the new project. inventories would rise by and accounts payable would increase by SIO,OOO. All of these costs would be incurred at The machinery will be depreciated under the Modified Accelerated Cost Recovery System (MACRS) as 3-year property. The depreciation rates arc 33% at t l, 45% att 2, 15% at 3, and 7% at t 4. Project life and salvage value: AAA Health expects to run the project for four years. The cash inflows are assumed to begin one year after the project is undertaken, or at t l, and to continue to t = 4. At the end of thc proict's life (t = 4), the equipment is expected to have a salvage value of $50,000. Also, the firm will recover the net working capital at the end of the project life. Sales and operating costs: Unit sales are expected to total 50.000 bottles per year, and the expected sale price is S 1 0 per bottle. Cash operating expenses for the project (total operating costs excluding depreciation) are expected to amount to 40 percent Of sales revenue. Tax rate: AAA's marginal tax rate is 30 percent. Information for the Cost of Capital Estimation AAA Health has outstanding bonds With a 6% annual coupon rate, 10 years remaining until maturity, and a facc value of S 1,000. The bonds make semiannual coupon payments and currently are trading in thc market at a price of S864.l(). A3H can issue preferred stock with an offering price of S25.00 per share, an annual per-share dividend of S2.40. Flotation costs are equal to 4.0% of the gross proceeds. Ten-year Treasury bond yield 5.52%; thc market risk premium the beta Of 'OH 1.6. Target weight of capital: 40 percent debt, 10 percent preferred stock, and SO percent common equity. A3H can undertake a new project Without issuing new shares Of common stock if the required initial investment does not exceed $600,000. Ifthe initial investment is greater than 0 000. the firm should sell new common stock.