Premier Watches Inc. is considering investing $125 million in a new plant for producing a new line of watches. The plant has an expected life of five years and expected sales of 12,000 watches per year. Fixed costs are $60 million a year, and variable costs are $2,000 per watch. The watches will be priced at $10,000 per watch. The plant will be depreciated straight-line over the five years to a salvage value of $0. Premiers opportunity cost of capital is 8% and Premiers effective tax rate is 21%.

1. (4 points) What is the projects depreciation tax shield for years 1 through 5?
2. (4 points) What is the present value of the projects depreciation tax shield?
3. (15 points) What is the projects NPV?