The Thrall Company won the contract to produce 1,000 Centerbeem Flatcars for BNSF Railway over a six year period. The details of the project are as follows:
Purchase Machinery and Equipment - $2,500,000 (no slavage value after six year life)
Working Capital Required - $1,000,000
Operating Revenue will change from $11,500,000 to $14,250,000
Operating Expenses will change from $9,000,000 to $9,500,000
Marginal Tax Rate - 25%
Risk-Free Return - 3%
Return on the Market - 12%
Project Beta - 1.20
The applicable MACRS percentages are 20% for year 1, 32% for year 2, 19% for year 3, 12% for year 4, 11% for year 5, and 6% for year 6.
What is the NPV of this Project? Was this a good contract for the Thrall Company to earn? Why or Why not?