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Pappys Potato has come up with a new product, the Potato Pet. Pappys paid $120,000...

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Accounting

Pappys Potato has come up with a new product, the Potato Pet. Pappys paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $815,000 per year. The fixed costs associated with this will be $196,000 per year, and variable costs will amount to 20 percent of sales. The equipment necessary for production of the Potato Pet will cost $865,000 and will be depreciated in a straight-line manner for the 4 years of the product life. This is the only initial cost for the production. Pappys has a tax rate of 40 percent and a required return of 13 percent. Calculate NPV and IRR.

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