Dent Enterprises (DE), a US-based medical research firm, has recently identified an island off the northeastern coast of Canada that it believes contains a large population of special spiders. The venom from these spiders will be used to fight a specific type of cancer that is unique to Europe. The owners of the island have offered to sell it to DE for USD 5 million. DE would also be faced with additional initial costs of USD 13 million to engineer the equipment that will extract the venom from the spiders. DE is an environmentally aware firm and has agreed to return the spiders to the island.

The spider population would provide enough venom to last for three years. The following information has been made available to DE:

Year	One	Two	Three
Revenues	USD 26 million	USD 28 million	USD 29 million
Operating Expenses (excluding depreciation)	USD 12 million	USD 15 million	USD 18 million
Depreciation Expense	USD 6 million	USD 2 million
Interest Expense	USD 1 million	USD 1 million	USD 1 million
Tax Rate	21%	21%	21%

DE issues a bond with a yield to maturity of 7.4% for $9 million.

DE issues shares of stock with a required return on equity of 11.6%.

DE will invest USD 2 million at the end year during the life of the project to plant spider friendly bushes and flowers, as well as construct a bird sanctuary on the south side of the island. DE expects to sell the island at the end of year 3 for USD 2 million.

5A. Compute the projects NPV.

5B. Describe two different examples of risks to which DE is exposed during this project.

5C. Identify and discuss one reason that John Deere might be interested in purchasing this island in 3 years.