Year Unit Sales

$17,000$

$28,000$

$39,000$

$410,000$

The proposed smartwatch is priced at $$300$ per unit, with variable costs at $$150$ per unit and fixed costs amounting to $$50,000$ annually. To initiate production, an additional $$25,000$ in net working capital is required upfront. Equipment procurement for production requires $$1,200,000.$ In addition, the equipment will cost $$60,000$ to set up$.$ The equipment falls under the three$-$year MACRS property, with a salvage value of $$15,000$ at the end of the four years. The company's marginal tax rate stands at $30\%.$

XyX$$s assets are $$500$ million, financed through bank loans, bonds, preferred stocks, and common stocks.

The amounts are as follows:

Bank loans: $ $100$ million borrowed at $7\mathrm{.}5\%$

Bonds: $$180$ million, paying a $8\%$ coupon with semi$-$annual payments, and maturity of $5$ years. XyX sold its $$1,000$ par$-$value bonds for $$1050$ and had to incur a $$50$ flotation cost per bond.

Preferred Stocks: $$20$ million, paying $$15$ dividends per share. XyX sold its preferred shares for $$160$ and had to incur a $$10/$share floatation cost.

Common Stocks: $$200$ million, the beta of FINA stocks is $1\mathrm{.}2,$ the $90-$day Treasury yield is $2\%,$ return on market portfolio is $12\%$

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 $3$ Year Property

$135\%$

$240\%$

$315\%$

$410\%$