Problem $6-11$ Calculating NPV

Medavoy Company is considering a new project that complements its existing business.

The machine required for the project costs $$4\mathrm{.}75$ million. The marketing department

predicts that sales related to the project will be $$2\mathrm{.}63$ million per year for the next four

years, after which the market will cease to exist. The machine will be depreciated to zero

over its $4-$year economic life using the straight$-$line method. Cost of goods sold and

operating expenses related to the project are predicted to be $25$ percent of sales. The

company also needs to add net working capital of $$215,000$ immediately. The additional

net working capital will be recovered in full at the end of the project's life. The corporate

tax rate is $23$ percent and the required return for the project is $10$ percent. What is the

value of the NPV for this project? $($Do not round intermediate calculations and enter

your answer in dollars, not millions of dollars, rounded to $2$ decimal places, e$.$g$.,$

$1,234,567\mathrm{.}89.$

NPV$=?$

Should the company proceed with the project?

No

Yes