Snow Inc. has developed a powerful efficient snow blower that is significantly less polluting than existing snow blowers currently on the market. The company spent $$2,500,000$ developing this product and the marketing department spent another $$350,000$ to assess the market demand. It would cost $$25$ million at Year $0$ to buy the equipment necessary to manufacture the efficient snow blower. The

project would require net working capital at the beginning of each year equal to $20\%$ of sales NOWCO $=20\%($Sales$]),$ NOWCI $=$

$20\%($Sales$2),$ etc.$).$ The efficient snow blowers would sell for $$3,500$ per unit, and the company believes that variable costs would amount to $$990$ per unit. The company expects that the sales price and variable costs would increase at the inflation rate of $4\%$ after year I. The company's non$-$variable costs would be S$800,000$ in Year $1$ and are expected to increase with inflation. The efficient snow blower project would have a life of $4$ years. If the project is undertaken, it must be continued for the entire $4$ years. Also, the project is expected to be of average risk. The firm believes it could sell $3,500$ units per year.

The equipment would be depreciated using a CCA rate of $30\%.$ The estimated market value of the equipment at the end of the project's

$4-$year life is its undepreciated capital cost $($i$.$e$,$ book value$)$ at the end of year $4.$ The company has other assets in this asset class. Its federal$-$plus$-$provincial tax rate is $30\%.$ Its cost of capital is $7\%$ for average risk projects. Low$-$risk projects are evaluated with a WACC of $6\%,$ and high$-$risk projects at $10\%.$ Assume that the half$-$year rule applies to the CCA.