I am having trouble with question 5!

members. Submit a word document that answers the questions and an Fixel spreadshect that supports all your calculations. Fashion House, I.ulu Designs, recently hired you as an assistant to the CFO. Your first task is evaluating whether l.ulu should expand by developing a new lingerie line. Your research reflects the following information: You cxpect the proposed project to span the next five ycars. Current estimates indicate sales will be 200,000 units in year one with 15% sales growth over the following 2 years and 6% growth in the final 2 years. The unil price in Year 1 is 550 . Given estimated demand and inflationary pressure, prices are expected to rise by 5% each subsequem year. The peoject requires purchasing new equipunem wouth $3 million, after installation. The new equipment is state-of the-art, so you cxpect to be able to sell it for 5500,000 when the project ends. As a resull of the project, current assets would incrcase by 5750,000 , and payables would increase by $450,000. The new equipment falls inlo the MACRS 7 -year class, so the applicable rates are 14.29%,24.49%,17.49%,12.49%,8.93%,8.92%, 8.93% and 4.46% in each suceessive year, Variable costs are estimated to be 70% of sales revenue, fixed costs excluding depreciation would are estimated at $2,500,000 per year, the state-plas-fcdcral tax rale is 25%, and the corporation's cost of capital is 12%. 1. Calculate the initial capital outlay, opcrating cash flows, and terminal cash flow for this project. 2. Calculate and interpeet the payback, discounted payback, net present value, internal rate of return, modified internal rate of return, and profitability index for this project. Should the project be accepted? 3. Suppose you are not very confident in your estimates for unit sales. To gauge the impact of a wrong cstimate, you analyze the sensitivity of NPV to different sales projections. Specifically, you calculate how NPV changes if your initial sales estimates are 10%,20%, and +30% above your initial estimates. Constract a table that shows the sensitivity analysis. Comment on whetherhow this affects the decision to implement the peoject. 4. In addition to the sales forecast, you would like to test the project's outcomes under various conditions. Suppose you want to examine the following secnasios: Construct a table that shown NPV under the various scenarios, the expected NPV, the standard deviation of NPV, and the coefficient of variation. Comment on whether/how this affects the decision to implement the project. 5. Typical projects for Lulu Designs typically have coefficients of variation that range between 0.95 to 1.25 . A 2-percentage point risk premium is added to the hurdle rate if the initial CV exceeds 1 , and the wace is reduced by 0.5 percentage points if the CV is 0.5or less. What should be the wace for this project? What is the revised value for the base-case NPV? 6. In addition to the previous risk analysis, are there any externalities that Lulu Designs shoald consider? "No calculations are necessary. Consider only conceptual issues*