Abbyfan is considering developing a Internet of Things appliance, called I O T A.

Sales forecast for I O T A is 40,000 units per year. The product will have a viable market for 4 years at an expected price of $200, after which the product will have zero sales. Production will be outsourced at a cost of $90 per unit.

To verify the compatibility with the I O T A system, Abbyfan must establish a new lab for testing purposes. They will rent the lab space, but need to purchase $3.5 million of new equipment. The equipment will be depreciated using the straightline method over a 5year life down to zero and will have zero resale value at that point.

The lab will be operational in one year, at which point I O T A can ship the product. Abbyfan expects to spend $2.0 million per year on rental costs for the lab space, as well as marketing and support for this product.

Abbyfan expects no incremental cash or inventory, but receivables related to I O T A are expected to account for 15% of annual sales and payables are expected to be 15% of the annual cost of goods sold.

Abbyfans managers believe that the I O T A project has risks similar to its existing projects, for which it has a cost of capital of 15%. Assume the company's tax rate is 40%.

Q1 Homework. Unanswered What are the project's free cash flows at the end of year 1? (1 point total) Type your numeric answer and submit Please type your answer to submit Unanswered Submit Q2 HomeworkUnanswered What are the project's free cash flows at the end of year 5? (1 point total) Type your numeric answer and submit Unanswered Submit Q3 Homework. Unanswered What is the NPV of this project? (1 point total) Type your numeric answer and submit Unanswered Submit 04 Homework. Unanswered What is the IRR of the project? (1 point total) Type your numeric answer and submit Unanswered Submit Q5 Homework. Unanswered What is the Payback Period of the project, in years? (1 point total) Type your numeric answer and submit Unanswered Submit Q1 Homework. Unanswered What are the project's free cash flows at the end of year 1? (1 point total) Type your numeric answer and submit Please type your answer to submit Unanswered Submit Q2 HomeworkUnanswered What are the project's free cash flows at the end of year 5? (1 point total) Type your numeric answer and submit Unanswered Submit Q3 Homework. Unanswered What is the NPV of this project? (1 point total) Type your numeric answer and submit Unanswered Submit 04 Homework. Unanswered What is the IRR of the project? (1 point total) Type your numeric answer and submit Unanswered Submit Q5 Homework. Unanswered What is the Payback Period of the project, in years? (1 point total) Type your numeric answer and submit Unanswered Submit