1. SpinCo. is considering a new investment in a 3 year project to manufacture and sell turntables. The firm believes it can sell turntables for $900 each and manufacture them at a variable cost per unit of $400 excluding depreciation expense. The estimated annual SG&A costs for the project are $1 million excluding depreciation expense. The project will require an upfront investment in new fixed assets of $6 million. SpinCo. will depreciate these assets on a straight line basis over the 3 year life of the project. SpinCo. expects to sell the fixed assets at the termination of the project for a salvage value of $1 million. The project is expected to require operating capital investments of $500k per year in years 1, 2 and 3. SpinCo. expects to recapture all of its operating capital investment at the termination of the project. SpinCo. has a 30% tax rate and requires a return of 12.19% on any new investments. The firm believes it can sell 10,000 turntables per year. (20 points)

1. What is the proposed project's Net Present Value?

2. What is the proposed projects Profitability Index? (2 decimal places)

3. Is the projects IRR greater than or less than 12.19% (please circle or highlight your answer)