B.1) Daylight firm is considering a new project that will last for three years. The new projects level of risk is the same as the level of risk of Daylight current business. The marketing department has estimated that the new project can sell 1000 units per year at $100 per unit. The yearly cost of goods sold is 50% of the sales revenues. The engineering department has estimated that buying a machine to start with the new project will cost $90,000. The new machine will be depreciated straight-line to zero over its three years life. There will be no scrapping value of the machine after three years. The working capitals needed for the new project are 5,000 in year 1 and 5,000 in year 2. The tax rate is 21 percent, and the discount rate is 12 percent. i. Calculate free cash flow for the new project. (4%) ii. Calculate NPV for the new project. (2%) iii. Evaluate how sensitive the projects NPV is to changes in the discount rate (Hint: calculate how much the discount rate can vary before the NPV reaches zero).