Your friend Katelyn Lugshury just graduated from Yorkville University and was immediately hired by Kelloggs to work as the Associate Brand manager for Rice Krispies. The first project is to determine if it would be a worthwhile endeavor to launch a new Rice Krispies with Strawberries product. After conducting a thorough market research program which cost $ 78,230, a five-year forecast was developed. (The assumption is that this product will only be sold for five years and then replaced with a new version). Below are the number of cereal boxes forecasted for sale for the next 5 years 2022 2023 2024 2025 2026 110,000 150,000 200,000 140,000 100,000 The assumptions below will be used in the new product launch analysis. Price per cereal box $3.25. Cost of Goods $1.25. Advertising expense $150,000 per year. Depreciation expense $40,000 per year. Tax Rate 40%

The company will need to purchase new equipment costing $200,000 to manufacture this new product. This equipment will be sold for $17,000 at the end of 2026 as scrap. The CCA rate for this equipment is 20%. The company will be required to initially purchase $30,000 worth of strawberries as inventory. The companys required rate of return is 27% 1. Create an income statement for this new product for each of the 5 years. 2. Calculate the NPV of this project. Include in your analysis the Operating Cashflows (EBIT + DEPRECIATION Taxes), CCA tax shield, Working Capital, Salvage value, and equipment costs. Should the company accept this project? 3. Calculate IRR, Payback, Discounted Payback and Profitability Index. 4. When presenting to the executive management team what types of questions should you anticipate from them? Also explain to the management team why you should not include the Market Research expenses in your analysis?