Calculation of HomeNets Free Cash Flow (Including Cannibalization and Lost Rent), Using Revision, assume SG&A expnses paid in Cash to Parent

1. What is the IRR?

2.What is the NPV when cost of capital is 12%?

\begin{tabular}{|clcccccc|} \cline { 3 - 8 } \multicolumn{1}{l|}{} & Year & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \multicolumn{2}{l|}{ Incremental Earnings Forecast (\$000s) } & & & & & & \\ 1 & Sales & & 23,500 & 23,500 & 23,500 & 23,500 & \\ 2 & Cost of Goods Sold & & (9,500) & (9,500) & (9,500) & (9,500) & \\ 3 & Gross Profit & & 14,000 & 14,000 & 14,000 & 14,000 & \\ 4 & Selling, General, and Administrative & & (3,000) & (3,000) & (3,000) & (3,000) & \\ 5 & Research and Development & (15,000) & & & & & \\ 6 & Depreciation & & (1,500) & (1,500) & (1,500) & (1,500) & (1,500) \\ 7 & EBIT & (15,000) & 9,500 & 9,500 & 9,500 & 9,500 & (1,500) \\ 8 & Income Tax at 40\% & 6,000 & (3,800) & (3,800) & (3,800) & (3,800) & 600 \\ 9 & Unlevered Net Income & (9,000) & 5,700 & 5,700 & 5,700 & 5,700 & (900) \\ Free Cash Flow (\$000s) & & & & & & \\ 10 & Plus: Depreciation & & 1,500 & 1,500 & 1,500 & 1,500 & 1,500 \\ 11 & Less: Capital Expenditures & (7,500) & & & & & \\ 12 & Less: Increases in NWC & & (2,100) & & & & 2,100 \\ 13 & Free Cash Flow & (16,500) & 5,100 & 7,200 & 7,200 & 7,200 & 2,700 \\ \hline \end{tabular}