Superior Manufacturing is thinking of launching a new product.  The
company expects to sell $950,000 of the new product in the first year
and $1,500,000 each year thereafter.  Direct costs including labor and
materials will be 55% of sales.  Indirect incremental costs are
estimated at $80,000 a year.  The project requires a new plant that
will cost a total of $1,000,000, which will be depreciated straight
line over the next five years. The new line will also require an
additional net investment in inventory and receivables in the amount
of $200,000.  Assume there is no need for additional investment in
building and land for the project. The firm's marginal tax rate is
35%, and its cost of capital is 10%.   Based on this information you
are to complete the following tasks.

Prepare a statement showing the incremental cash flows for this
project over an 8-year period.

Calculate the Payback Period (P/B) and the NPV for the project. 

Based on your answer for question 2, do you think the project should
be accepted? Why? Assume Superior has a P/B (payback) policy of not
accepting projects with life of over three years.

If the project required additional investment in land and building,
how would this affect your decision? Explain.