CASE 1

If HP maintains the same real price and in effect sells for fewer dollars, the annual sales price per unit is equal to

($220R$3.60/$)R$4.30/$=$184.

The direct cost per unit is 60% of the sales, or

$2200.60=$132.

Case 1	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Sales volume (units)	40,000	44,000	48,400	53,240	58,564	64,420
Sales price per unit	$184	$184	$184	$184	$184	$184
Total sales revenue	7,360,000	8,096,000	8,905,600	9,796,160	10,775,776	11,853,354
Direct cost per unit	$132	$132	$132	$132	$132	$132
Total direct costs	5,280,000	5,808,000	6,388,800	7,027,680	7,730,448	8,503,493
Gross profits	$2,080,000	$2,288,000	$2,516,800	$2,768,480	$3,045,328	$3,349,861

Part 2 If HP's weighted average cost of capital is 14%, what is the cumulative present value of the firm's gross margin?$enter your response here(Round to the nearest dollar.)