Your company has been doing well, reaching $1.04

million in earnings, and is considering launching a new product. Designing the new product has already cost $503,000.

The company estimates that it will sell 836,000 units per year for$3.03

per unit and variable non-labor costs will be $1.16

per unit. Production will end after year 33.

New equipment costing $1.1 million will be required. The equipment will be depreciated using 100% bonus depreciation under the 2017 TCJA. You think the equipment will be obsolete at the end of year 33 and plan to scrap it. Your current level of working capital is $294,000.

The new product will require the working capital to increase to a level of $384,000

immediately, then to

$ 400 comma 000$400,000

in year 1, in year 2 the level will be

$ 341 comma 000$341,000,

and finally in year 3 the level will return to

$ 294 comma 000$294,000.

Your tax rate is

21 %21%.

The discount rate for this project is

10.3 %10.3%.

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 bonus depreciation schedule, depreciation in year 1 will be

$nothing.

(Round to the nearest dollar.)Depreciation in years 2 and 3 will be

$nothing.

(Round to the nearest dollar.)

Complete the capital budgeting analysis for this project below:(Round to the nearest dollar.)