The manager of PPO Inc. plans to manufacture engine blocks for classic cars from the 1960s. The revenue from the blocks will be $750,000 per year for each of the next 4 years. The equipment will cost $800,000 depreciated using a 3 year MACRS life. There will be a change in net operating working capital of $10,000. Assume a zero salvage value. Operating costs for each of the 4 years will be $250,000. Assume a 25% tax rate and a 12% discount rate (cost of capital).

a. What are the cash flows for years 0 through 4?

b. Calculate the net present value, the IRR, MIRR, and Profitability Index, Payback for the project.

c. Will you accept this project?