Practice Problem IM&C Company is considering a two-year project to produce a line of power mulchers. The manufacturing equipment costs $290. Transportation and installation are an additional $10. If depreciated, the Company would use the schedule below for tax purposes. Variable cost is $50 per unit. Fixed cash costs are $200 per year, starting at time 1. Net operating working capital is $40 for time 0 and 10% of sales until it is recovered at the end of the project. The Company expects to sell the equipment for $120 at the end of the project. The marginal tax rate is 30%. The weighted average cost of capital (WACC) is 12%. The table below provides forecasted prices and quantities. Create a capital budgeting worksheet and compute the net present value, internal rate of return, profitability index, and payback. Time 1 2 Time 1 2 3 4 Unit price $120 $100 Dep. rates 0.30 0.40 0.20 0.10 Unit sales 8 7 NPV IRR PL If equipment is depreciated: 136.5 0.39 0.40 If equipment is expensed: 152.2 0.53 0.61