Starfish Ltd. specialises in Tuna production, and it is considering purchasing new equipment to produce a unique flavor product. The equipment costs $400,000 today. The life of the equipment will be 5 years after which it is expected to be sold for 30% of the original cost. Sales in the first year is expected to be 1000 units and is forecasted to increase by 2% yearly. Each unit is going to cost $1.10 to produce. To introduce this new product in the market, each unit will be sold at $1.90 in the first year after which the price will be set at $2.30 for the next four years. The equipment will also need to be maintained in the second year of production for a cost of $30,000. Starfish has 60% of its capital financed through equity, costing 15% p.a. The debt holders are willing to charge 2% less on what the shareholders earn. a) Draw the timeline and set out annual cash inflows, outflows and net cash flows by year. [5 marks] b) Calculate the weighted average cost of capital (WACC) for this project. [3 marks] c) Calculate the Net Present Value (NPV) for this project. Explain if the project should be accepted according to NPV decision rule. d) Given your answer to part c), without calculation, would you be able to identify if any of the following statements would apply? Why or why not? - Payback period > cut-off point - Payback period