Tastee$-$Pro Inc. is considering a proposal to manufacture high$-$end protein bars.

The project requires use of an existing warehouse that the firm acquired $4$ years ago for $$2,200,000$ and currently rents out for $$200,000$ per year, collecting rent at the end of each year. Rental rates are expected to remain constant for the next $10$ years. Assume the warehouse was previously allocated $100\%$ bonus depreciation and has no remaining book value.

In addition to using the warehouse, the project requires an upfront investment into machinery of $$3,500,000.$ This investment can be fully depreciated under the straight$-$line method over the next $10$ years for tax purposes. However, Tastee$-$Pro expects to terminate the project at the end of $7$ years and to sell the machinery for $$750,000.$

The project requires a net working capital equal to $13\%$ of projected sales $($i$.$e$.$ net working capital requirement in year $t$ is $13\%$ of sales in year $t+1.$ The net working capital investment will be fully recovered in the final year of the project