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Your company has been doing well, reaching $ 1 . 0 9 million in earnings, and is considering launching a new product. Designing the new

Your company has been doing well, reaching $1.09 million in earnings, and is considering launching a new product. Designing the new product has already cost $543,000. The company estimates that it will sell 769,000 units per year for $3.02 per unit and variable non-labor costs will be $1.08 per unit. Production will end after year 3. New equipment costing $1.16 million will be required. The equipment will be depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $292,000. The new product will require the working capital to increase to a level of $387,000 immediately, then to $405,000 in year 1, in year 2 the level will be $343,000, and finally in year 3 the level will return to $292,000. Your tax rate is 21%. The discount rate for this project is 9.6%. Do the capital budgeting analysis for this project and calculate its NPV.
Note: Assume that the equipment is put into use in year 1.
Design already happened and is (irrelevant).(Select from the drop-down menu.)
According to the 7-year MACRS schedule, depreciation in year 1 will be $.(Round to the nearest dollar.)
Depreciation in year 2 will be $,(Round to the nearest dollar.)
Depreciation in year 3 will be $,(Round to the nearest dollar.)
Complete the capital budgeting analysis for this project below. (Round to the nearest dollar.)
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