M&P Electronics, Inc., projects unit sales for a new wearable AI training device for athletes. Production of the devices will require $4,500,000 in net working capital to start and additional net working capital investments each year equal to 12 percent of the projected sales increase for the following year. Total fixed costs are $4,900,000 per year, variable production costs are $385 per unit, and the units are priced at $550 each. The equipment needed to begin production has an installed cost of $17,000,000. Because the wearable AI technology are intended for professional athletes, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. M&P is in the 35 percent marginal tax bracket and has a required return on all its projects of 18 percent.

1. Prepare the financial statements based on the information provide.

2. Based on the project estimates, what is the NPV of the project?

3. What is the IRR?

4. What do these results indicate?

5. Based strictly on the calculations, which proposals should be accepted or rejected.

6. What subjective (social, economic, governance, etc.) elements might influence any decisions?

7. Assume the VP of Operations requests second review on the equipment and maintains that the numbers presented are correct, but he wants you to consider that $500,000 has already been spent on the initial research on this project are not included in your calculations. He suggests that this might influence your decision. What should be your response?

8. Present your calculations in Excel and please remember, you must show ALL calculations to receive credit. Please give critical reasoning to the answers that require essay answers.