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

Please do calculations and show all work