The Taylor Mountain Uranium Company currently has annual revenues of $1.5 million and annual expenses exclusive of depreciation of $790,000. Depreciation amounts to $285,000 per year. These figures are expected to remain constant for the foreseeable future (at least 15 years). The firm's marginal tax rate is 43 percent.

A new high-speed processing unit costing $1.3 million is being considered as a potential investment designed to increase the firm's output capacity. This new piece of equipment will have an estimated usable life of 10 years and a $0 estimated salvage value. If the processing unit is bought, Taylor's annual revenues are expected to increase to $1.9 million, and annual expenses exclusive of depreciation will increase to $810,000. Annual depreciation will increase to $350,000. Assume that mo increase in net working capital will be required as a result of this project.

a.Calculate the processing unit's net present value, using a 12 percent required return.

b.Should Taylor accept the project?

c.Calculate the processing unit's internal rate of return.