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 $103 each, and the company analysts performing the analysis expect that the firm can sell 108,000 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 $21 per unit and fixed costs, not including depreciation, are forecast to be $1,070,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.9 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 $300,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here:

Initial cost of the machine $9,900,000 Expected life 5 years Salvage value of the machine $0 Working capital requirement $300,000 Depreciation method straight line Depreciation expense $1,980,000 per year Cash fixed costsexcluding depreciation $1,070,000 per year Variable costs per unit $21 Required rate of return or cost of capital 10.8% Tax rate 34%

a. Calculate the project's NPV.

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

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

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

e. Determine the sensitivity of the project's NPV to a(n) 8 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 108,000 76,680 139,320 Price per unit $103 $90.64 $122.57 Variable cost per unit $(21) $(23.31) $(19.11) Cash fixed costs per year $(1,070,000) $(1,305,400) $(952,300) Depreciation expense $(1,980,000) $(1,980,000) $(1,980,000)