Toowoomba Terriers, a local pet food company, is looking to produce a new tinned food for the growing pet food market. It is expected to be a complete nutritional package which promotes healthy coats and teeth. The following information will help you evaluate the project.

• It will cost $1.45 million to build the factory required to produce the food
• Working capital of $350,000 is required to support the day-day operations.
• Sales are expected to start at 50,000 tubs a year.
• Selling for $15 per two-litre tub.
• Sales are expected to grow at 5% per year, compounding.
• This will happen because of the $62,000 per year spent on marketing
• A nutrition scientist who created the recipe charged $25,000 for their efforts.
• Other COGS are $140,000 per year.
• Variable costs are $2.40/tub, expected to grow at 4% per year.
• Depreciation is straight line to zero
• Tax is 30%
• The life of the project is 8 years
• The all-important discount rate is 12%

Use the template shown below to answer the following questions:

a) What is the NPV for this project. While writing answer for NPV, put + sign for positive NPV and - sign for negative NPV. Also, include TWO decimal points in your answers.

b) What is the IRR for this project?

(Note* In the template provided CFOA refers to "Operating Cash Flow")

Year	0	1	2	3	4	5	6	7	8
Revenue
Marketing
COGS
Variable cost
Depreciation
EBIT
Tax
CFOA
Capital expense
Working capital
Free Cash Flow

NPV = IRR =