Galaxy Corp. is considering opening a new division to make iWidgets that it expects to sell at a price of $$12,990$ each in the first year of the project. The company expects the cost of producing each iWidget to be $$7,225$ in the first year; however, it expects the selling price and cost per iWidget to increase by $3\%$ each year.

Based on this information, select the correct answer:

Selling price in year $4$:

Cost per unit in year $4$:

If a company does not take inflation into account when analyzing a project, the expected net present value $($NPV$)$ of the project will typically be than the true NPV of the project.