1. If the cost of capital for this project is 10%, what is your estimate of the NPV of the new project?
2. Conduct a scenario analysis when the cost of capital is 8% (optimistic scenario) or 12% (pessimistic scenario) as well as when the sales revenue are 10% higher (optimistic scenario) or 10% lower (optimistic scenario).

Hamdan Company is considering making the following investments. + Year 0 Year Year Year Year Year Year Year Year Year Year 7 Year 9 1 2 3 4 5 6 8 10 Cost of machine ($28.00) ($14.00) $14.0 Change in net working capital 1. Sales revenue 0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 $20. 40 $20. 40 $20. 40 $20. 40 $20. 40 $20. 40 $20. 40 $20. 40 $20. 40 $20.4 0 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2. Minus cost of goods sold 3. Equals gross profit 4. Minus General, sales and administrative expense 5. Plus overhead that would have occurred anyway 6. Minus Depreciation 7. Equals net operating income 8. Minus income tax $0.6 $0.6 $0.6 $0.6 $0.6 $0.6 $0.6 $0.6 $0.64 $0.6 4 4 4 4 4 4 4 4 2.80 2.80 2.80 2.80 2.80 2.80 2.80 2.80 2.80 2.80 $16. $16. 00 00 $16. $16. $16. $16. $16. $16. $16. $16.0 00 00 00 00 00 00 00 0 $4.8 $4.8 $4.8 $4.8 $4.8 $4.8 $4.8 $4.8 $4.8 $4.8 $0.00 $11. $11. $11. 9. Equals Net income $11. 20 $11. 20 $11. 20 $11. $11. 20 20 $11. 20 $11. 20 20 20 20 $2.8 $2.8 $2.8 $2.8 $2.8 $2.8 $2.8 $2.8 $2.8 $2.8 10. Plus depreciation 11. Cost of machine plus change in net working capital 12. Equals cash flow ($32.0) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $14.0 ($32.0) $14. $14. $14. $14. $28.0 $14. 0 $14. $14. $14. $14. 0 0 0