Your company has been doing well, reaching $1.19 million in earnings, and is considering launching a new product. Designing the new product has already cost $506,000. The company estimates that it will sell 812,000 units per year for $3.01 per unit and variable non-labor costs will be $1.04 per unit. Production will end after year 3. New equipment costing $1.14 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 3 and plan to scrap it. Your current level of working capital is $296,000. The new product will require the working capital to increase to a level of $386,000 immediately and then to $399,000 in year 1, in year 2 the level will be $355,000, and finally in year 3 the level will return to $296,000. 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

QUESTION PART 1. According to the bonus depreciation schedule, depreciation in year 1 will be $ (Round to nearest dollar)

QUESTION PART 2.

QUESTION PART 3. The NPV of the project is $ (Round to the nearest whole dollar.)

Year 1 Year 2 Year Sales Cost of Goods Sold Gross Profit Depreciation EBIT - Incremental amings +Depreciation - Incremental Working Capital Capital Investment Incremental Froo Cash Flow The NPV of the project is (Round to the nearest dollar.) Year 1 Year 2 Year Sales Cost of Goods Sold Gross Profit Depreciation EBIT - Incremental amings +Depreciation - Incremental Working Capital Capital Investment Incremental Froo Cash Flow The NPV of the project is (Round to the nearest dollar.)