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 $102 each, and the company analysts performing the analysis expect that the firm can sell 110,000 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 the new technology. In addition, variable costs are expected to be $21 per unit and fixed costs, not including depreciation, are forecast to be $1,040,000 per years. To manufacture this product, Blinkeria will need to buy a computerized production machine for $10.8 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 $306,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here:

Initial Cost of the machine: $10,800,000

Expected Life: 5 years

Salvage Value of the machine: $0

Working Capital requirement: $306,000

Depreciation Method: Straight LIne

Depreciation Expense: $2,160,000 per year

Cash Fixed costs- excluding depreciation $1,040,000 per year

Variable costs per unit: $21

Required rate of return or cost of capital: 9.9%

Tax Rate: 34%

a.Calculate the project's NPV.

b.Determine the sensitivity of the project's NPV to a(n) 12 percent decrease in the number of units sold.

c.Determine the sensitivity of the project's NPV to a(n) 12 percent decrease in the price per unit.

d.Determine the sensitivity of the project's NPV to a(n) 12 percent increase in the variable cost per unit.

e.Determine the sensitivity of the project's NPV to a(n) 12 percent increase in the annual fixed operating costs.

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

	Expected or Base Case	Worst Case	Best Case
Unit Sales	110,000	74,800	145,200
Price per Unit	$102	$91.80	$122.40
Variable cost per unit	$(21)	$(22.89)	$(19.32)
Cash fixed costs per year	$(1,040,000)	$(1,248,000)	$(925,600)
Depreciation Expense	$(2,160,000)	$(2,160,000)	$(2,160,000)