5. A three-year project requires an initial investment (i.e., at t=0) in equipment of $100,000. At t=3, the company plans to sell the equipment for $10,000. The equipment can be depreciated according to the three year schedule, which allows depreciation of 33.33% at t=1, 44.45% at t=2, 14.81% at t=3, and 7.41% at t=4. Depreciation will be based solely on the initial cost of the equipment (i.e., when calculating depreciation, ignore any salvage value). This project is expected to produce sales revenue of $400,000 per year for each of the three years of the project (i.e., sales revenue will be $400,000 for t=1, t=2, and t=3). Manufacturing costs are estimated to be $300,000 per year. Working capital requirements are estimated to be 15% of next year's revenue; so, for example, the working capital required at t=0 is 15% of t=1 revenue, or $60,000. Working capital will be fully recovered when the project ends. The corporate tax rate is 25%. The company's tax situation is such that it can make use of all applicable tax shields and deductions. The opportunity cost of capital is 20%. a. Calculate the Net Present Value (NPV) of the project. b. How will the project NPV change if the revenue is 20% higher than estimated? How will the project NPV change if the revenue is 20% lower than estimated? c. How will the project NPV change if the manufacturing costs are 10% higher than estimated? How will the project NPV change if the manufacturing costs are 10% lower than estimated? d. Based on your answers above, prepare a sensitivity table for this project. Is the project decision to accept or reject more sensitive to the revenue estimate or to the cost estimate? HINT: Use Excel