Capital Budgeting Example Capital Budgeting is the process used to analyze investments and decide which one/s to accept using one or more decision rules. A technology firm has completed a $300,000 feasibility study to assess the attractiveness of a new product, NewTech, that will significantly transform the technology experience of households. Given that technology changes rapidly and can soon become obsolete the project has an estimated life of four years. Sales of NewTech are projected to be 100,000 units in year 1, 125,000 units in years 2 and 3, and 50,000 units in year 4. The sales price per unit of NewTech will be $260 in year 1 and is expected to decline by 10% per year thereafter. The per unit cost of NewTech is expected to be $110 in year 1 and will decline by 10% per year thereafter. 25% of sales of NewTech come from customers who would have purchased an existing product, OldTech, by the same technology firm for $100 per unit in year 1 if NewTech was not available. The cost per unit of OldTech in year 1 will be $60. Thereafter, the sales price per unit and the per unit cost of OldTech will decline by 10% per year. Selling, General, and Administrative expenses will be $2.8 million in year 1 and is expected to rise by 4% per year thereafter. New equipment of $7.5 million will have to be purchased immediately to manufacture NewTech. The new equipment has an expected life of 5 years (Straight Line Depreciation will be used) and will be housed in an existing lab. Alternatively, the lab space could be rented out for $200,000 in year 1 and rising by 4% per year thereafter. Thus, there is an opportunity cost to using the space. An upfront expenditure of $15 million ($5 million in Hardware; $10 million in Software) in Research and Development (R&D) will also be required. An investment in working capital will be required for the new project. Receivables and Payables will constitute 15% of Sales and Cost of Goods Sold respectively. The marginal corporate tax rate is 40%. Determine if the technology firm should go ahead with NewTech, assuming the cost of capital is 12%. Can you show me how to do this, please