Reference no: EM132031241

White Waters Inc. plans a 4-year capital investment project, where it requires an asset that costs $160,000. The asset will be depreciated using the 3-year MACRS (use these schedule: 33%, 44%, 14%, and 7% for years 1 to 4, respectively). The company expects that the asset will be worth $30,000 at the end of the project. Incremental sales are expected to be $90,000, $120,000, $130,000 and $150,000 for year 1 to 4, respectively. Corresponding variable expenses are expected to be 40% of the sales, and the fixed costs are $25,000 a year. The company will need to invest $14,000 at time=0 in net working capital, which will increase $1,000 each year. The cost of capital is 14% and the corporate tax rate is 30%. White Waters will have to use a building that it bought 15 years ago for $150,000. This building could generate lease income of $20,000 a year if the project is not undertaken. It also spent $80,000 in R&D to develop the new product for this project. To partly finance the project, the company plans to borrow $100,000 at a 10% interest rate for the duration of the project. Develop the cash flows for the project. What are its NPV, IRR, and MIRR? Interpret the results in your own words. For grading details, please see the associated rubric.