Sweet Water Enterprise is considering expanding into a new line of business. It is expected that this new business will require the purchase of equipment that will cost $400,000 with an estimated market value of 20,000 at end of 9 years, and will require an additional $46,000 to deliver and install. The new equipment will be depreciated using 7-year-MACRS Sweet Water intends to operate it for 9 years.

The new project will require an initial increase in NWC investment of $40,000.

First year revenues from the new venture are expected to be $600,000. Sales growth rate expected to be 4% per year, costs 55% of revenues and fixed costs to be $30,000 per year.

Sweet Water's marginal tax rate is 40% and its average tax rate is 35%.

Calculate NPV & IRR given required rate of return (discount rate, cost of capital) of 12%

Should the project be accepted? Why?

Use vlookup function to calculate annual depreciation.