This project involves a new type of widget. We think we can sell 6,000 units of the widget per year at a price of $1,000 each. Variable costs will run about $400 per unit and the product should have a four-year life.

Fixed cost for the project will run $450,000 per year and we will need to invest a total of $1,250,000 in manufacturing equipment. The equipment will be depreciated using MARCS over seven years. In your four, the equipment will be worth half of what we paid for it.

We will invest $1,150,000 in net working capital at the start. After that, net working capital requirements will be 25% of sales. Assume 34% tax rate.

Hint: Prepare a pro forma income statement for each year. Then calculate OCF. Draw this on a time line. Then calculate NPV assuming a 28% required return.

Please show all work as the work will be the main part of the grade.

MARCS Table
Year
1	14.29%
2	24.49%
3	17.49%
4	12.49%