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Pan 2 Onts. O OT 1 Your company has been doing well, reaching $1.19 million...

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Pan 2 Onts. O OT 1 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 $461,000. The company estimates that it will sell 844,000 units per year for $2.95 per unit and variable non-labor costs will be $1.16 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 $291,000. The new product will require the working capital to increase to a level of $390,000 immediately, then to $405,000 in year 1, in year 2 the level will be $355,000, and finally in year 3 the level will return to $291,000. Your tax rate is 21%. The discount rate for this project is 10.1%. Do the capital budgeting analysis for this project and calculate its NPV. Note: Assume that the equipment is put into use in year 1

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