Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer. These scanners are expected to sell for an average price of $105 each, and the company analysts performing the analysis expect that the firm can sell 100,000 units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be $20 per unit and fixed costs, not including depreciation, are forecast to be $1,060,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.5 million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $308,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here:

Initial cost of the machine $9,500,000 Expected life 5 years Salvage value of the machine $0 Working capital requirement $308,000 Depreciation method straight line Depreciation expense $1,900,000 per year Cash fixed costsexcluding depreciation $1,060,000 per year Variable costs per unit $20 Required rate of return or cost of capital 9.6% Tax rate 34%

a.Calculate the project's NPV. (Round to the nearest dollar.)

b.Determine the sensitivity of the project's NPV to a(n) 8 percent decrease in the number of units sold. (Round to the nearest dollar.)

c.Determine the sensitivity of the project's NPV to a(n) 8 percent decrease in the price per unit. (Round to the nearest dollar.)

d.Determine the sensitivity of the project's NPV to a(n) 8 percent increase in the variable cost per unit. (Round to the nearest dollar.)

e.Determine the sensitivity of the project's NPV to a(n) 8 percent increase in the annual fixed operating costs.(Round to the nearest dollar.)

f.Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst- and best-case scenarios are listed here: (Round to the nearest dollar.)

	Expected or Base Case	Worst Case	Best Case
Unit Sales	100,000	72,000	128,000
Price per Unit	$105	$94.50	$123.90
Variable Cost per Unit	$(20)	$(22.00)	$(18.20)
Cash Fixed Costs per Year	$(1,060,000)	$(1,272,000)	$(954,000)
Depreciation Expense	$(1,900,000)	$(1,900,000)	$(1,900,000)