Cathy's Cats is considering launching a new toy, Sir Issac Mewton. Cathy's Cats already paid $185,000 for a marketing survey to determine the viability of the new toy. You have collected the following data on the project: Sales are projected to be $900,000 per year from year 1 through year 4. The variable costs will amount to 18% of sales, and the fixed costs will be $230,000 per year The initial capital investment in the necessary equipment is$980,000, which will be depreciated in a straight-line manner for the four years of the project life. The equipment is expected to have a salvage value of $100,000 at the end of year 4. The corporate tax rate is 20%, and the required return on investments of this level of risk is 13% No additional investment in net working capital is required In answering the questions below, please show your work. 1. Compute the cash flow from assets for each year. (10 points] 2. What is the NPV of the project? [5 points] 3. If the projected variable costs increase to 25% of sales, how much would the project's NPV change? (5 points)

A D Question 13 20 pts Cathy's Cats is considering launching a new toy, Sir Issac Mewton. Cathy's Cats already paid $185,000 for a marketing survey to determine the viability of the new toy. You have collected the following data on the project Sales are projected to be $900,000 per year from year 1 through year 4. The variable costs will amount to 18% of sales, and the fixed costs will be $230,000 per year The initial capital investment in the necessary equipment is $980,000, which will be depreciated in a straight-line manner for the four years of the project life. The equipment is expected to have a salvage value of $100.000 at the end of year 4. The corporate tax rate is 20%, and the required return on investments of this level of risk is 13% No additional investment in net working capital is required In answering the questions below, please show your work. 1. Compute the cash flow from assets for each year. [10 points] 2. What is the NPV of the project? [5 points] 3. If the projected variable costs increase to 25% of sales, how much would the project's NPV change? (5 points) Edit Format Table V 17 Paragraph BIUA 2 | || |