Please calculate the Net Present Value and the Payback Period of the project using the following information

The projected revenues and costs associated with this investment are as follows:

Market research costing the firm $10,000, and a selling price of $5,000 per set of sofas have been agreed. Variable production costs will amount to 45 percent of the selling price, and fixed costs are $1 million per year.

Sales will be 2,000, 2,500, 3,000, 2,000 and 1,800 sofa sets per year for years t=1, 2, 3, 4, and 5, respectively. A new range of products will replace this sofa set at the end of the 5th year.

One area of concern is that the selling of the new sofas will reduce the companys existing traditional dining table products (Russell Hobbs). It is estimated that sales of Russell Hobbs will go down from 10,000 units per year to 9,000 units per year. The Russell Hobbs sells for $2,000 per unit and has a variable production cost amounting to 40 percent of the selling price.

To produce the sofas, the company needs to make an initial investment of $10 million in equipment. The equipment is depreciated to zero book value over the 5-year period using the straight-line method. At the end of the 5th year, the equipment will be sold at a market price of $2 million.

Changes in working capital requirements: Cash increases by 5% of the change in sales; inventory increases by 5% of the change in sales; trade receivables increase by 5% of the change in sales; and trade payables increase by 5% of the change in variable production costs. These working capital requirements are company-level policies and are applicable to both the sofa sets and the dining tables. Working capital will be required at the end of year 1 and will be released later.

All revenues and expenses are paid in cash in the year they incur.

The corporate tax rate is 40 percent.

The project has a beta of 1.5, the risk-free rate is 3% and the market risk premium is 6%.

Please show a detailed calculation process