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Task1. You have been appointed as a consultant for the Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing rapidly. The company purchased some land 3 years ago for $1.46 million in exceptions of using it as a toxic waste dump site however has recently appointed another company to handle all toxic materials. Based on a recent appraisal, the company thinks it could sell the land for $1.56 million on an after-tax basis. In 4 years, the land could be sold for $1.66 million after taxes. The company also appointed a marketing firm to analyze the zither market, at a cost of $131,000. An excerpt of marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be capable to sell 4,400, 5,300, 5,900, and 4,800 units each year for the upcoming four years, correspondingly. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $710 can be charged for each zither. Since zithers appear to be a fad, we feel at the end of the four-year period, sales must be discontinued. PUTZ thinks that fixed costs for the project will be $455,000 per year, and variable costs are 15 percent of sales. The equipment essential for production will cost $4.10 million and will be depreciated according to a 3 year MACRS schedule. At the end of project, the equipment can be scrapped for $430,000. Net working capital of $131,000 will be needed immediately. PUTZ has a 40 percent tax rate, and the required return on the project is 13 percent. What is NPV of project?

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