Answer the next four questions about the following project. FasinTek Products is considering launching a new trailer hitch coupler that is designed to provide a better and safer way to tow boats and camper trailers for off-road use. They are forecasting increasing sales for the first three years, but then a decrease in year four as competitors arrive on the scene. Unit Sales 12,000 14,000 16,000 15,000 Year 1 N 3 4 They plan to sell the units for $26.50 in years 1-2, $27.50 in year 3, but only $23.00 in year 4 when competitors begin to put downward pressure on the price. FasinTek's cost to produce the devices is $13.50 per unit, while their fixed costs are $26,000 per year. The marketing department believes the coupling device will actually provide some competition to the company's current line of hitch products, cutting into sales of their current products at a level of $2000 per year. They estimate that the project will require an initial increase in current assets of $10,000, and an increase in current liabilities of $6000. They assume full recovery of NOWC at the end of the project. The cost of the assembly equipment will be $300,000, with additional shipping costs of $4000, and installation costs of $20,000. The equipment is classified as 3-year MACRS property. The operations manager believes the equipment can be salvaged at the end of the project for $84,000. FasinTek's marginal tax rate is 34% and the required return on the project is 24%. Question 1 1 pts What is the NPV of the project? O 4244 -3432 5680 o 4670 2007 D Question 2 1 pts Suppose the product manager believes the new product will be adopted by many on-road haulers as well. She suggests that competition to the company's current line of hitch products will be greater than originally estimated, cutting into sales of their current products at a level of $10,000 per year. How does this affect the NPV? New NPV - 12.471 New NPV --8024 New NPV - 127 New NPV - 1581 Question 3 1 pts Going back to the original project description and estimates, suppose the production manager comes back with a revised estimate of how much it will cost to produce the coupler. She indicates a projected shortage of raw materials could push the cost to produce the devices to $15.50 per unit. What happens to the NPV? New NPV - 12,480 New NPV-820 New NPV --39.575 New NPV - -17,348 Question 4 1 pts Going back to the original project description and estimates, suppose FasinTek can recover only 50 percent of the original change in NOWC. How would this affect the NPV? New NPV = -1200 New NPV - 3824 OoOo New NPV - 6448 New NPV - 1008