*IN EXCEL ONLY* For the parts 1-5: begin by assuming you have: Unit Sales: 8275 Sales Growth Rate, years 1-4: 0.07 Inflation Rate: 0.02 Real Cost of Capital: 0.11 Tax Rate: 0.22

Sales Revenue / Unit: 10.79 Variable Cost / Unit: 7.23 Cash Fixed Costs: 8676 Investment: 50271.

*IN EXCEL ONLY* Part 1: What are the projected unit sales in year 7 if sales are expected to increase by 12% in year 5, and then decrease by 21% in years 6 and 7?"

a. 7085.84

b. 4389.31

. 8969.42

d. 8275

*IN EXCEL ONLY* Part 2: Assuming sales revenue per unit, variable cost per unit, and cash fixed costs all increase by the rate of inflation, what is your projected gross margin in

. 57694.03

b. 17597.34

. 28408.12

d. 29459

*IN EXCEL ONLY* Part 3: What is the net present value of this project?

a. -5523.6

b. 43850.62

. 42990.8

d. 42130.98

*IN EXCEL ONLY* Part 4 : After you conduct your initial analysis, you discover that the firm has the option to abandon the project and sell its specialized equipment at the end of year 8 for $4189.25.

What is the new NPV of the project?

a. 44747.4

b. 42130.98

-44747

d. -42130.98

*IN EXCEL ONLY* Part 5: Your boss is apprehensive about your worksheet and your estimation of this project's NPV. Without using solver, change the unit sales of your existing model as it stands from the prior find the number of unit sales needed in year 1 to give you an NPV of zero.

problem

(i.e., assuming the option to abandon from #4 is exercised, basically DO NOT REVERT YOUR ANSWER BACK BEFORE COMPLETING THE PROBLEM)

. 5125.93

b. 8357.75

2819.26

d. 3760.9875