After looking at the projections of the HomeNet project, you decide that they are not realistic It is unlikely that sales will be constant over the four year life of the project Furthermore, other companies are likely to offer competing products, so the assumption that the sale price will remain constant is also likely to be optimistic. Finally, as production ramps up, you anticipate lower per unit production costs resulting from economies of scale. Therefore, you decide to redo the projections under the following assumptions Sales of 50,000 units in year 1 increasing by 50 000 units per year over the life of the project, a year 1 sales price of $260/unit decreasing by 11% annually and a year 1 cost of $120/unit decreasing by 21% annually. In addition, now tax laws allow 100% bonus depreciation (all the depreciation expense occurs when the assetis put into use in this case immediately) a. Keeping the other assumptions that underlie Table 3.1 (m) the same, recalculate unlevered not income (that is, reproduce Table 81 under the new assumptions, and note that we are ignoring cannibalization and lost ront) b. Recalculato unlovered net income including lost ront and assuming that each year 20% of sales come from customers who would have purchased an existing Chico router for $100/unit and that this router costs 560 unit to manufacture ie Year 0 1 2 3 4 5 ind n le 3 TO 26,000 26,000 26,000 26,000 (11,000) (11.000) (11,000) (11.000) 15,000 15,000 15,000 15,000 (2.800) (2.800) (2.800) (2.800) ad Incremental Earings Forecast (5000) 1 Sales 2 Cost of Goods Sold 3 Gross Profits 4 Selling. General, and Administrative 5 Research and Development 6 Depreciation 7 EBIT 8 Income Tax at 20% 9 Unlevered Net Income Ind (15,000) (15,000) 3,000 (12,000) (1,500) 10,700 (2,140) 8,560 (1.500) 10,700 (2,140) 8,560 (1,500) 10,700 (2.140) 8,560 (1,500) 10,700 (2,140) 8,560 (1,500) (1,500) 300 (1.200) After looking at the projections of the HomeNet project, you decide that they are not realistic It is unlikely that sales will be constant over the four year life of the project Furthermore, other companies are likely to offer competing products, so the assumption that the sale price will remain constant is also likely to be optimistic. Finally, as production ramps up, you anticipate lower per unit production costs resulting from economies of scale. Therefore, you decide to redo the projections under the following assumptions Sales of 50,000 units in year 1 increasing by 50 000 units per year over the life of the project, a year 1 sales price of $260/unit decreasing by 11% annually and a year 1 cost of $120/unit decreasing by 21% annually. In addition, now tax laws allow 100% bonus depreciation (all the depreciation expense occurs when the assetis put into use in this case immediately) a. Keeping the other assumptions that underlie Table 3.1 (m) the same, recalculate unlevered not income (that is, reproduce Table 81 under the new assumptions, and note that we are ignoring cannibalization and lost ront) b. Recalculato unlovered net income including lost ront and assuming that each year 20% of sales come from customers who would have purchased an existing Chico router for $100/unit and that this router costs 560 unit to manufacture ie Year 0 1 2 3 4 5 ind n le 3 TO 26,000 26,000 26,000 26,000 (11,000) (11.000) (11,000) (11.000) 15,000 15,000 15,000 15,000 (2.800) (2.800) (2.800) (2.800) ad Incremental Earings Forecast (5000) 1 Sales 2 Cost of Goods Sold 3 Gross Profits 4 Selling. General, and Administrative 5 Research and Development 6 Depreciation 7 EBIT 8 Income Tax at 20% 9 Unlevered Net Income Ind (15,000) (15,000) 3,000 (12,000) (1,500) 10,700 (2,140) 8,560 (1.500) 10,700 (2,140) 8,560 (1,500) 10,700 (2.140) 8,560 (1,500) 10,700 (2,140) 8,560 (1,500) (1,500) 300 (1.200)