XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital to start and addition net working capital investments each year equal to 15% of the projected sales increase for the following year. Total fixed costs are $1,350,000 per year, variable production costs are $225 per unit, and the units are priced at $345 each. The equipment needed to begin production has an intalled cost of $23,000,000. The equipment is qualified as seven-year MACRS property. MACRS stands for Modified Accelerated Cost Recovery System, where businesses apply MACRS rates to the capital expenditure for annual depreciation amount. In five years, this equipment can be sold for about $4,600,000. The company is in the 35% marginal tax bracket and has a required rate of return on all its projects of 18%.

1. What is the NPV and IRR for this project? Shall the project be accepted? Why? (10 points)
	NPV =
	IRR =
	Type your answer here:

2. The projected unit sales presented above is the most likely case. Please conduct a scenario analysis for the worst and best case scenarios. It's your understanding that the unit sales will be 10% less (more) for the worst (best) case scenario compares to the most likely case. (20 points)
	Scenarios		Best Case	Most Likely	Worst Case
	NPV
	IRR

Input Area
Year	1	2	3	4	5	6	7	8
Projected unit sales	80,000	85,000	90,000	95,000	95,000	0	0	0
MACRS Rates	14.29%	24.49%	17.49%	12.49%	8.93%	8.92%	8.93%	4.46%