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 $533,000. The company estimates that it will sell 826,000 units per year for $3.05 per unit and variable non-labor costs will be $1.04 per unit. Production will end after year 33. New equipment costing $1 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 $306,000. The new product will require the working capital to increase to a level of $387,000 immediately, then to $410,000 in year 1, $352,000 in year 2, and finally return to $306,000. Your tax rate is 35%. The discount rate for this project is 9.6%. Do the capital budgeting analysis for this project and calculate its NPV.

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 $533,000. The companyestimates that it will sell 826,000 units per year for S3.05 per unit and variable non-labor costs will be $1.04 per unit. Production will end after year 3. New equipment costing S1 milion 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 $306,000. The new product will require the working capital to increase to a level of $387,000 immediately, then to $410,000 in year 1, $352,000 in year 2, and finally return to $306,000. Yourtax rate is 35%. The discount rate for this project is 9.6%. Do the capital budgeting analysis for this project and calculate its NPV Complete the capital budgeting analysis for this project below: (Round to the nearest dollar. Year 0 Year 1 Year 2 Year 3 Sales Cost of Goods Sold Gross Profit Depreciation EBIT Tax s Incremental Earnings Depreciation -Incremental Working Capital S -Capital Investment Incremental Free Cash Flow