Rainbow is manufacturing plush toys. The firm thinks that manufacturing of plastic toys would be profitable. Marketing department made a marketing research that costs $210.000. After that research Rainbow is determined for the production. New toy requires a new machine. New toys will be produced in the facility of the firm which was bought 5 years ago. This facility can be sold for $150.000 (after taxes) now.

New machine costs $200.000 to buy. It has 5 years of useful life and can be sold for $30.000 at the end of usedful life (straight line depreciation). The manufacturing units will be 5000 in the first year, 8000 in the second year, 12000 in the third year, 10000 in the fourth and 6000 in the fifth year. These toys will be sold for $30 per unit. Prices will increase by %2 in each year. The cost of manufacturing is $10 in the first year and will increase by %10 in each of the following years. Tax rate: %34

Net working capital is the difference between current assets and current liabilities. Rainbow knows that it will need raw materials before manufacturing and it will also have some cash as a caution. Credit sales will also increase.

In the year of investment the net working capital requirement is $10.000 net working capital amount will be 1. Year: $10.000, 2nd year $16320, 3. year $24970, 4. year $21.200, last year it will be 0.

Should Rainbow accept the Project if the cost of capital is %17? Calculate NPV and tell the reason.

If cost of capital is %5, %8, %20, %30 and %40 repectively what would be the NPV? Draw the NPV Profile.

Calculate the IRR. Should Rainbow accept the Project according to IRR result? Why?

Tip: Take the difference between the specific year and the previous year to calculate the change in net working capital each year.

Please solve step by step all the sections that need to be answered in the question.

Warning: I know the solution for this same problem is on chegg. But I want this problem to be solved again in a more original way.