A Dolls is contemplating the production and distribution of a new line of remote-controlled toy trucks that drive themselves. X anticipates that the volume will be 3,000 units in the first year, then it will increase by 500 units annually for the next three years, before leveling off at a stable equilibrium and decreasing by 300 units annually for the following two years. It is anticipated that each unit will have a contribution margin of $50. The production facility has an initial cost of $450.000, which must be paid in full. X will use a method of depreciation known as straight-line depreciation in order to spread the cost of the facility out over its useful life of five years. The first year's cost of advertising will be $70,000, and then it will decrease to $50,000 annually for the following four years. The cost of operating the building will be $15,000 per year for the first three years, and then it will increase to $20,000 for the final two years of its life. Unless otherwise specified, the annual costs will be distributed uniformly across the entire year. It is anticipated that the cost of capital (CoC) will be 6%.

As part of the process of determining whether or not A should launch the new product, the President, Sally Mander, has requested that you present the Board of Directors with your analysis for the first five years of the product's existence. Please respond to the questions that follow.

What is the NPV of the new product at the expected CoC?

What is the NPV of the new product if the CoC drops to 5.0%?

If the CoC is 5.0%, what is the Payback Period?