(TCO I) (Ignore income taxes in this problem.) Simpson Beauty Products Corporation is considering the production of a new conditioning shampoo that will require the purchase of new mixing machinery. The machinery will cost $700,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $70,000 at the end of 10 years. The machinery will also need a $45,000 overhaul at the end of Year 5. A $60,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 10 years. The new shampoo is expected to generate net cash inflows of $150,000 per year for each of the 10 years. Simpson's discount rate is 18%.

Items	Year(s)	Amount	18% Factor	Present Value
Cost of machinery	Now	($700,000)	1	($700,000)
Working capital increase	Now	($60,000)	1	($60,000)
Annual cash inflows	110	$150,000	4.494	674,100
Overhaul	5	($45,000)	0.437	($19,665)
Salvage value	10	$70,000	0.191	13,370
Working capital release	10	$60,000	0.191	11,460
Net present value			($80,735)

Required:

(a) What is the net present value of this investment opportunity?

(b) Based on your answer to (a) above, should Simpson go ahead with the new conditioning shampoo?