Apix is considering coffee packaging as an additional diversification to its product line. Here’s information regarding the coffee packaging project: Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net

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Apix is considering coffee packaging as an additional diversification to its product line. Here’s information regarding the coffee packaging project:     
                   
Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year 
Project and equipment life: 5 years               
Sales: $27 million per year for five years               
Assume gross margin of 50% (exclusive of depreciation)             
Depreciation: Straight-line for tax purposes              
Selling, general, and administrative expenses: 10% of sales             
Tax rate: 35%                 
                   
Assume a WACC of 10%.                
                   
Should the coffee packaging project be accepted? Why or why not? Compute the project’s IRR and NPV.         
                   
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    Apix is considering coffee packaging as an additional diversification to its product line. Here’s information regarding the coffee packaging project: Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net
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