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The proposed smartwatch is priced at $ per unit, with variable costs at $ per unit and fixed costs amounting to $ annually. To initiate production, an additional $ in net working capital is required upfront. Equipment procurement for production requires $ In addition, the equipment will cost $ to set up The equipment falls under the threeyear MACRS property, with a salvage value of $ at the end of the four years. The company's marginal tax rate stands at
XyXs assets are $ million, financed through bank loans, bonds, preferred stocks, and common stocks.
The amounts are as follows:
Bank loans: $ million borrowed at
Bonds: $ million, paying a coupon with semiannual payments, and maturity of years. XyX sold its $ parvalue bonds for $ and had to incur a $ flotation cost per bond.
Preferred Stocks: $ million, paying $ dividends per share. XyX sold its preferred shares for $ and had to incur a $share floatation cost.
Common Stocks: $ million, the beta of FINA stocks is the day Treasury yield is return on market portfolio is
XyX uses WACC to discount future cash flows. Employing the NPV and IRR analyses, assess whether XyX should proceed with the proposed smartwatch project. Provide reasoning.
Additional information: Depreciation Table
Year Year Property
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