This is all one question, thank you for your help!
Your company has been doing well, reaching $1 million in earnings, and is considering launching a new product. Designing the new product has already cost $471,000. The company estimates that it will sell 834,000 units per year for $3.07 per unit and variable non-labor costs will be $1.11 per unit. Production will end after year 3 . New equipment costing $1.17 million will be required. The equipment will be depreciated to zero using the 7 -year MACRS schedule. You plan to sell the equipment for book value at the end of year 3 . Your current level of working capital is $309,000. The new product will require the working capital to increase to a level of $372,000 immediately, then to $405,000 in year 1 , in year 2 the level will be $342,000, and finally in year 3 the level will return to $309,000. Your tax rate is 21%. The discount rate for this project is 9.5%. Do the capital budgeting analysis for this project and calculate its NPV. Note: Assume that the equipment is put into use in year 1. Design already happened and is (irrelevant). (Select from the drop-down menu.) According to the 7-year MACRS schedule, depreciation in year 1 will be \$ 170,051. (Round to the nearest dollar.) Depreciation in year 2 will be $291,431. (Round to the nearest dollar.) Depreciation in year 3 will be $208,131. (Round to the nearest dollar.) Complete the capital budgeting analysis for this project below: (Round to the nearest dollar.) Your company has been doing well, reaching $1 million in earnings, and is considering launching a new product. Designing the new product has already cost $471,000. The company estimates that it will sell 834,000 units per year for $3.07 per unit and variable non-labor costs will be $1.11 per unit. Production will end after year 3 . New equipment costing $1.17 million will be required. The equipment will be depreciated to zero using the 7 -year MACRS schedule. You plan to sell the equipment for book value at the end of year 3 . Your current level of working capital is $309,000. The new product will require the working capital to increase to a level of $372,000 immediately, then to $405,000 in year 1 , in year 2 the level will be $342,000, and finally in year 3 the level will return to $309,000. Your tax rate is 21%. The discount rate for this project is 9.5%. Do the capital budgeting analysis for this project and calculate its NPV. Note: Assume that the equipment is put into use in year 1. Design already happened and is (irrelevant). (Select from the drop-down menu.) According to the 7-year MACRS schedule, depreciation in year 1 will be \$ 170,051. (Round to the nearest dollar.) Depreciation in year 2 will be $291,431. (Round to the nearest dollar.) Depreciation in year 3 will be $208,131. (Round to the nearest dollar.) Complete the capital budgeting analysis for this project below: (Round to the nearest dollar.)
