(Calculating project cash flows and NPV) Review your answer to the previous Study Problem (12–16). You now find out that the business has an expected payback period of three years and that it plans to fund this project with bank debt at a cost of 10 percent. You have been asked to give an opinion, with reasons, as to whether the project should still go ahead.

a. What percentage increase in unit sales would be required cumulatively across the four years to generate an NPV in excess of £100,000?

b. What difference would it make if the £60,000 research cost were viewed as sunk funds?