Quick Computing Co. is going to invest in a new production line. The project will generate revenues of $20m per year for the next 4years(year 1-4).They spent $0.2m to do a feasibility study to assess its potential.

Cost:

Upfront operating expense = $8m(year 0); Cost of new equipment = $10m(lasts for 5 year life, depreciated using straight-line method over the 5-year life);

Depreciation (year 1-5) = $2m per year; Cost of Goods Sold(year 1-4)= $11m per year;

SG&A (year 1-4) = $1.5m per year; Tax rate = 30%

Additional info:

(1)The new production line will be placed in a warehouse space that the company would have otherwise rented for$0.3m per year during the four years.

(2)The new production line will reduce the operating of another existing production line (OLD model) for the four years. COGS of OLD model will be reduced by $1m per year. Revenue of OLD model will be reduced by $1.5m per year.

A.Make a table and show me the incremental profit from this project.

B.Assume that for Quick Computing Co., receivables are 15% of revenue, payables are 15% of COGS. Also assume that Quick Computing Co. is able to sell the new production line for $1m at the end of year 5. Make a table and show me the incremental cash flows from this project.

C.Assume the required rate of return is 11%. Based on NPV, should we accept this project?