Starbucks is considering a project where they will sell to the public the coffee makers that they use in

their stores. This way customers can brew their Starbuck's coffees at home and not have to worry about

going inside the restaurant and being exposed to other people or having to spend money on gas driving

to the store. The chief marketing officer $($ CMO $)$ estimates that they will sell $5,000$ units a year for $5$ years

at a price of $$135$ each. The chief operations officer $($COO$)$ estimates that the variable costs to build

these will be $76\mathrm{.}4\%$ of revenue. The COO says the company will need to buy an assembly line to make

these. The assembly line costs $$575,000$ and has a shipping cost of $$15,000.$ The COO adds that they will

need to purchase an additional $$40,000$ in inventory and accounts payable will increase by $$7,000.$ Once

the project ends, they will no longer need additional inventory and will pay the accounts payable

balance. The chief financial officer $($CFO$)$ The CFO says to use the MACRS $3$ year class for depreciation.

$($These are the same rates as used in the slides.$)$ He estimates that the assembly line will have a salvage

value of $$12,000.$ He notes that Starbuck's tax rate is $22\mathrm{.}5\%$ and that the normal WACC is $9\mathrm{.}1\%.$ The

CMO notes that they have done an extensive marketing survey and many Starbucks customers are

scared to go to a store in today's environment and would be happy to purchase their own equipment.

This research is already paid for and cost $$75,000.$

What are the capital expenditures for this project?

a$.440,000$

d$.600,000$

What are the cash flows for year $0$ of this project?

a$.-594,500$ b$.-623,000$ c$.-667,500$ d$.-704,000$

What is the IRR of this project?

a$.4\mathrm{.}67\%$ b$.7\mathrm{.}94\%$ c$.8\mathrm{.}05\%$ d$.8\mathrm{.}82\%$

What is the NPV of this project?

a$.-13000\mathrm{.}44$ b$.4,436\mathrm{.}38$ c$.1,555\mathrm{.}89$ d$.4,660\mathrm{.}95$