Parker Products manufactures a variety of household products

5. (10 points) Parker Products manufactures a variety of household products. The company is considering introducing a new detergent. The company’s CFO has collected the following information about the proposed product. (Note: You may or may not need to use all of this information, use only the information that is relevant.)a. The project has an anticipated economic life of 4 years. To assess the demand for the new product, last year the company conducted a marketing survey that cost $60,000.b. The company will have to purchase a new machine to produce the detergent. The machine has an up-front cost (t = 0) of $2 million. The machine will be depreciated on a straight-line basis over 4 years (that is, the company’s depreciation expense will be $500,000 in each of the first four years (t = 1, 2, 3, and 4).) The company anticipates that the machine will last for four years, and that after four years, its salvage value will equal $0.c. If the company goes ahead with the proposed product, it will have an effect on the company’s net working capital. At the outset, t = 0, inventory will decrease by $150,000 and accounts payable will increase by $80,000. At t = 4, the net working capital will be recovered after the project is completed.d. The detergent is expected to generate sales revenue of $2 million in each year. Each year the operating costs (not including depreciation) are expected to equal 50 percent of sales revenue.e. If the project is accepted, the company’s interest expense each year will be $100,000, however dividends will be reduced by $50,000.f. The new detergent is expected to reduce the before-tax cash flows of the company’s existing products by $250,000 a year (t = 1, 2, 3, and 4).g. The proposed project is riskier than the average project for Parker; the project’s Cost of Capital is estimated to be 12 percent.h. The company’s tax rate is 40 percent. What is the net present value of the proposed project?