Quantitative Problem: Sunshine Smoothies Company $($SSC$)$ manufactures and distributes smoothies. SSC is considering the development of a new line of

high$-$protein energy smoothies. SSC$\text{'}$s CFO has collected the following information regarding the proposed project, which is expected to last $3$ years:

The project can be operated at the company's Charleston plant, which is currently vacant.

The project will require that the company spend $$4\mathrm{.}1$ million today $(t=0)$ to purchase additional equipment. For tax purposes the equipment will be

depreciated on a straight$-$line basis over $5$ years. Thus, the firm's annual depreciation expense is $$4,100,\frac{000}{5}=$$$820,000.$ The company plans to use the

equipment for all $3$ years of the project. At $t=3($which is the project's last year of operation$),$ the equipment is expected to be sold for $$1,500,000$ before

taxes.

The project will require an increase in net operating working capital of $$730,000$ at $t=0.$ The cost of the working capital will be fully recovered at $t=3$

$($which is the project's last year of operation$).$

Expected high$-$protein energy smoothie sales are as follows:

Year Sales

$1,$$$2,200,000$

$2,7,750,000$

$3,3,500,000$

The project's annual operating costs $($excluding depreciation$)$ are expected to be $60\%$ of sales.

The company's tax rate is $40\%.$

The company is extremely profitable; so if any losses are incurred from the high$-$protein energy smoothie project they can be used to partially offset taxes

paid on the company's other projects. $($That is$,$ assume that if there are any tax credits related to this project they can be used in the year they occur.$)$

The project has a WACC $=10\mathrm{.}0\%.$

What is the project's expected NPV and IRR? Round your answers to $2$ decimal places. Do not round your intermediate calculations.

NPV $

IRR

$\%$

Should the firm accept the project?