Suppose you are considering a new project for your firm. The project is expected to run for five years. The end deliverable for the project is that it produces a widget. The widget is expected to be brand new to the market and, as such, will have great demand at first. That demand will die away as competition enters the market. The firm projects the following price points and units sold for each of the five years.

MACRS Year 1: 33.33% Year 2: 44.44% Year 3: 14.82% Year 4: 7.41% Year	Price per unit	Number of units sold
1	$24	20,000
2	$18	16,000
3	$15	11,000
4	$13	6,000
5	$10	3,000

Costs of goods sold are expected to be 40% of sales. Initially, the project requires the purchase of two very large machines. The first has a cost of $180,000, while the second costs $120,000. Both will be fixed assets to the firm, and will be depreciated as MACRS three-year property classes. In addition, the project will require an increase in NWC of $150,000, which cannot be depreciated. Both machines will be sold at the end of the project and are expected to have a selling price of $90,000 at that time. 25% of the change in NWC can be recovered at the end of the project. Taxes are 35%. You may round to the nearest dollar throughout.

A) If the projects k = 8%, what is the NPV of the project? (20 pts)

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
NCF

NPV: _____________

B) If the projects k = 8%, what is the profitability index of the project? (10 pts)

Profitability Index: ______________