Solar Flares Fireworks is considering adding a new line of fireworks called Sparkly Boomers to its product line. Sparkly Boomers are expected to have a five year life. Research has been performed for a cost of $5,000,000 and resulted in the following data:

Sparkly Boomers will need a new factory at a cost of $11 million with an installation cost of $3 million. ( 5 year MACRS) The land used to build the factory generates $100,000 of income a year. Sparkly Boomers are projected to sell 500 units a year at a price of $25,000 per unit and an expense of $10,000 per unit Crackling Fire (a current best seller) is expected to sell 100 units less a year with a price of $20,000 per unit and a cost of $7,000 per unit. Soothing Lights is expected to sell 50 units more a year with a price of $7,000 per unit and a cost of $1,000 per unit If the project is implemented, for $7,000,000, refurbishing the Crackling Fires and Soothing Lights factories can be combined - this cost is amortized using a 5 year MACRS The Crackling Fire factory was built 3 years ago for a price of $6 million and can be sold today for $4 million. This factory had a 5 year MACRS. At the end of five years the Sparky Boomer factory will be sold for $1 million

This project will have no impact on net working capital but will increase fixed expenses $500,000 a year The company has a 21% tax rate. The company is 50% debt with a pre-tax cost of 6% and 50% common stock. The common stock's beta is 2, market rate is 8% and risk free rate is 2%. Using the Weighted Average Cost of Capital and the Profit Metrics (payback, Profit Index, NPV and IRR) determine if you should do this project Show all work