A video rental store will cost $640,000 to open. Assuming annual sales of $1 million, variable costs of 35%, fixed costs of $300,000, depreciation of $100,000, and a tax rate of 35%, calculate the NPV of the project over a 10-year horizon (no inflation or salvage value assumed) with a 12% cost of capital. Conduct a sensitivity analysis by allowing investment, sales, variable costs, and fixed costs to vary by plus/minus 10% from their original estimates. Which variable appears to affect profitability the most?

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