Pointless Luxuries Inc. $($PLI$)$ produces unusual gifts targeted at wealthy consumers. The firm is analyzing the possibility of

introducing a new device designed to attach to the color of a cat or dog. The device emits sonic waves that neutralize

airplane engine noise, so that pets traveling with their owners can enjoy a more peaceful ride. PLI estimates that

developing this product will require up$-$front capital expenditures of $$9$ million. These costs will be depreciated on a

MACRS $5-$year schedule. PLI believes that it can sell the product initially for $$250.$ The selling price will increase to $$260$

in years $2$ and $3,$ before falling to $$245$ and $$240$ in years $4$ and $5,$ respectively. After five years the company will

withdraw the product from the market and replace it with something else. Upon withdrawal, the firm believes that the

salvage value of the equipment would be $$625,000.$ Variable costs are $$135$ per unit. PLI forecasts sales volume of

$20,000$ units in the first year, with subsequent increases of $25\%($year $2),20\%($year $3),20\%($year $4),$ and $15\%($year $5).$

The firm expects operating expenses, other than depreciation, to be $$220,000$ for all five years. PLI is currently in the

$34\%$ tax bracket.

The working capital needs are the following...

Year $0$ $$0$

Year $1$ $$200,000$

Year $2$ $$250,000$

Year $3$ $$300,000$

Year $4$ $$150,000$

Year $5$ $$0$

$2.)$ Pointless Luxuries Inc. currently has a $$19\mathrm{.}60$ stock price and $295,800,000$ shares outstanding. In addition, the firm

currently has a Beta of $1\mathrm{.}75$ and has eight different debt issues outstanding. The details of those debt issues are

presented below. $($in image$)$

$3.)$The relevant Treasury yield is $1\mathrm{.}25\%,$ and the anticipated market risk premium is $8\mathrm{.}00\%.$

Calculate the NPV$,$ IRR, and PI for the project.

Create a NPV matrix assuming a plus or minus $5\%$ adjustment to the following four inputs:

$-$Purchase Price of Capital Asset

$-$Salvage Value

$-$Variable Cost