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Harrington plc is considering whether to introduce a new line of scanners that can be used to copy material and then download it into a computer. These scanners are expected to sell for an average price of $100 each, and the company analysts performing the analysis expect that the firm can sell 100,000 units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of a more advanced technology. In addition, the firm's management expects that direct material $8 and direct labor will be $12 per unit, and fixed costs, not including depreciation, are forecast to be $1,000,000 per year. To manufacture this product, the company will need to buy a production machine for $9 million that has an expected life of five years and no residual or salvage value. There will be installation costs of $500 000 and training costs of $500 000. In addition, the firm expects it will have to invest an additional $300,000 in working capital to support the new business. A market research of $600 000 was carried out and the results of which were positive. Other pertinent information concerning the business venture is as follows: Initial cost of the machine $10,000,000 Expected life 5 years Salvage value of the machine $0 Working-capital requirement $300,000 Depreciation method Straight-line Depreciation expense $2,000,000 per year Cash fixed costs-excluding depreciation $1,000,000 per year Variable cost per unit $20 Required rate of return or cost of capital 10% Tax rate 34% Required: Using the net present value technique, calculate whether the project is acceptable. Provide reasons for expenses not included in the calculation

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