Principles of Finance New Project Analysis Problem Docs Hunting and Fishing, LLC is considering a new product. The product is a kids model fishing pole. Determine Payback, NPV and IRR based on the following assumptions (show all work): Selling price is $12.00 Variable costs per unit are: variable materials - $6.80, variable selling and administrative - $3.80 Equipment costs are $380,000 plus $20,000 for delivery and set-up Assume a MACRS five-year life (use percentages below) o Year 1 20% o Year 2 32% o Year 3 19% o Year 4 12% o Year 5 6% Annual fixed costs are $53,000 Life of project is 3 years Estimated demand is 200,000 units per year Inventory will increase by $400,000 (at time 0) and will decrease by same amount at end of project Accounts Receivable will increase by $100,000 (at time 0) and will decrease by same amount at end of project Accounts Payable will increase by $300,000 (at time 0) and will decrease by same amount at end of project At the end of the project, the machine will be sold for $250,000 (if there is a gain on sale, remember taxes) Tax rate is 40% The company currently has an outstanding bond paying 10%. Similar bonds are currently yielding 15%. The common stock has a price of $30 and pays a dividend of $1.80 per share. The dividends are expected to grow at 12% in the future. The preferred stock is selling at $46.76 per share and pays a dividend of $5 per share. Flotation costs for preferred stock are 3% of the selling price. The optimal capital structure for the company is 40 percent debt, 10 percent preferred stock, and 50 percent common equity. Based on this information, calculate the weighted average cost of capital and use this for the projects discount rate. Note: round WACC to the nearest whole number. Based on your findings, should the company accept or reject this project? Why? Would your answer change if the price changed from $12.00 to $11.00