Theranos, (https://en.wikipedia.org/wiki/Theranos) a small privately held company, claims to have devised rapid blood tests that required only very small amounts of blood to test for a wide range of illnesses. The potential demand for this product in the next five years is as follows: Year Unit Sales 1 1,070,000 2 1,230,000 3 1,340,000 4 1,560,000 5 955,000 Production of the blood test will require $2,500,000 in net working capital to start and additional net working capital investments each year equal to 40% of the projected sales increase for the following year. (Because sales are expected to fall in Year 5, there is no NWC cash flow occurring for Year 4.) Total fixed costs are $2,600,000 per year, variable production costs are $15 per unit, and the tests are priced at $35 each. The equipment needed to begin production has an installed cost of $25.5 million. The machinery falls into Class 8 for CCA purposes (20%) and the marginal tax rate is 40%. After 5 years, the equipment can be sold for 35% of its acquisition cost. Because the company is a start-up with an unproven track record, the required return for this project is 23%. Theranos, (https://en.wikipedia.org/wiki/Theranos) a small privately held company, claims to have devised rapid blood tests that required only very small amounts of blood to test for a wide range of illnesses. The potential demand for this product in the next five years is as follows: Year Unit Sales 1 1,070,000 2 1,230,000 3 1,340,000 4 1,560,000 5 955,000 Production of the blood test will require $2,500,000 in net working capital to start and additional net working capital investments each year equal to 40% of the projected sales increase for the following year. (Because sales are expected to fall in Year 5, there is no NWC cash flow occurring for Year 4.) Total fixed costs are $2,600,000 per year, variable production costs are $15 per unit, and the tests are priced at $35 each. The equipment needed to begin production has an installed cost of $25.5 million. The machinery falls into Class 8 for CCA purposes (20%) and the marginal tax rate is 40%. After 5 years, the equipment can be sold for 35% of its acquisition cost. Because the company is a start-up with an unproven track record, the required return for this project is 23%