Case Study: You are evaluating a project for your company. Last year the Company spent $ 100,000 researching about the p

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Case Study: You are evaluating a project for your company. Lastyear the Company spent $ 100,000 researching about the project. Youestimate the sales price to be $500 per unit and sales volume to be50 thousand units in year 1; 100 thousand units in year 2; and 90thousands units in year 3. The project has a three-year life.Variable costs amount to $150 per unit and fixed costs are $500,000per year. The project requires an initial investment of $25 millionin assets which will be depreciated straight-line to 50 thousandover the three-year project life. The actual market value of theseassets at the end of year 3 is expected to be $145,000. NWCrequirements at the beginning of each year will be approximately 15percent of the projected sales during the coming year. The tax rateis 21 percent. To finance this project, the company issued onemillion shares of common stock outstanding and selling at $ 21.5per share and 5,000 bonds. The bond is offered at 5% coupon bondwith 15 years to maturity and sold at 98 per cent (semiannual). Theindustry beta of similar firms is 1.59, the current risk-free rateis 3.09 percent, and the expected return on the market is 10.59percent. Requirements:
1. Calculate the Net Present Value (NPV) of this project. Roundthe discount factor to the nearest 3 decimals.
2. Advise the company on the project and outline other factorsthat you would take into consideration in your decision.