You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine...

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You have been hired as a consultant for Pristine Urban-TechZither, Inc. (PUTZ), manufacturers of fine zithers. The market forzithers is growing quickly. The company bought some land threeyears ago for $2.55 million in anticipation of using it as a toxicwaste dump site but has recently hired another company to handleall toxic materials. Based on a recent appraisal, the companybelieves it could sell the land for $2.75 million on an aftertaxbasis. In four years, the land could be sold for $2.95 millionafter taxes. The company also hired a marketing firm to analyze thezither market, at a cost of $305,000. An excerpt of the marketingreport is as follows:
The zither industry will have a rapid expansion in the next fouryears. With the brand name recognition that PUTZ brings to bear, wefeel that the company will be able to sell 6,400, 7,100, 7,700, and6,000 units each year for the next four years, respectively. Again,capitalizing on the name recognition of PUTZ, we feel that apremium price of $490 can be charged for each zither. Becausezithers appear to be a fad, we feel at the end of the four-yearperiod, sales should be discontinued.
PUTZ believes that fixed costs for the project will be $615,000per year, and variable costs are 15 percent of sales. The equipmentnecessary for production will cost $3.3 million and will bedepreciated according to a three-year MACRS schedule. At the end ofthe project, the equipment can be scrapped for $545,000. Networking capital of $255,000 will be required immediately. PUTZ hasa tax rate of 23 percent, and the required return on the project is10 percent. MACRS Schedule
What is the NPV of the project?

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You have been hired as a consultant for Pristine Urban-TechZither, Inc. (PUTZ), manufacturers of fine zithers. The market forzithers is growing quickly. The company bought some land threeyears ago for $2.55 million in anticipation of using it as a toxicwaste dump site but has recently hired another company to handleall toxic materials. Based on a recent appraisal, the companybelieves it could sell the land for $2.75 million on an aftertaxbasis. In four years, the land could be sold for $2.95 millionafter taxes. The company also hired a marketing firm to analyze thezither market, at a cost of $305,000. An excerpt of the marketingreport is as follows:The zither industry will have a rapid expansion in the next fouryears. With the brand name recognition that PUTZ brings to bear, wefeel that the company will be able to sell 6,400, 7,100, 7,700, and6,000 units each year for the next four years, respectively. Again,capitalizing on the name recognition of PUTZ, we feel that apremium price of $490 can be charged for each zither. Becausezithers appear to be a fad, we feel at the end of the four-yearperiod, sales should be discontinued.PUTZ believes that fixed costs for the project will be $615,000per year, and variable costs are 15 percent of sales. The equipmentnecessary for production will cost $3.3 million and will bedepreciated according to a three-year MACRS schedule. At the end ofthe project, the equipment can be scrapped for $545,000. Networking capital of $255,000 will be required immediately. PUTZ hasa tax rate of 23 percent, and the required return on the project is10 percent. MACRS ScheduleWhat is the NPV of the project?