Launch	Proj Yr 1	Proj Yr 2	Proj Yr 3	Proj Yr 4	Proj Yr 5
Operating Assumptions
	Sales Growth
	Category growth rate	4%	4%	4%	4%	4%	4%
	Incremental growth rate		2%	1%	0.50%	0%	0%
	Historic/Base sales	$139,500,000
	Gross Margin	69%
	Cost reductions since new design is less expensive	$119,000	$119,000	$119,000	$119,000	$119,000	$119,000
	Development
	Marketing and R&D	$700,000
	Start-up expenses
	Partial case returns net of salvage value	$1,800,000
	Label conversion costs	$700,000
	Freight charge/Launch year expenses	$400,000
	Other miscellaneous	$300,000
	Tax Rate	27%	27%	27%	27%	27%	27%
	Discount Rate	7%	7%	7%	7%	7%	7%
New Investment
	PP&E
	Cap/Pump molds	$1,590,000
	Change parts	$260,000
	Pump assembly	$570,000
	Depreciable life(Years)	6

How do i solve this graph?

Case study:

The new packaging would require the purchase of molds and assembly equipment (useful life of six years on all) as follows: Cap/Pump molds $1,590,000 Change part 260,000 Pump assembly 570,000 In addition, the firm will incur start-up expenses related to partial case returns and other items. It is assumed that major customers will be able to manage down their inventory levels with the assistance of the transitions team. Minimal returns will come from large retailers including WalMart and Kmart due to their quick inventory turnover. It is anticipated that most returns will come from drug retailers as they shift products to the new packaging and remove unsold product from the shelves. Partial case returns net of salvage value $1,800,000 Label conversion costs 700,000 Freight charge/launch year expenses 400,000 Other miscellaneous 300,000 The redesign calls for cutting SKU's from 79 to 49. No volume loss is anticipated from this since the transition team will actively manage shelf space on a customer-by-customer basis to minimize loss of shelf presence. The SKU reduction is estimated at $119,000 per year since the new package design is less expensive per unit. The brand's current long-term strategic role is to maintain share and grow at category levels. Sales in the most recent year were $139.5 million. Without the redesign, sales are forecast to remain flat at historic levels. With the redesign, management believes that sales can grow at the rate of the skincare categoryforecast at 4% per year for the next five yearsand there will also be incremental growth related to recovery of market share of 2% in Year 1, 1% in Year 2, 0.5% in Year 3, and 0% thereafter. The gross margin will remain at 69% of net sales. The incremental marketing and development cost is a one-time $700,000 for market research and development. Management thought the project should be evaluated using a discount rate of 7% based on the firm's weighted average cost of capital (WACC) and the perceived riskiness of the project. The tax rate is 27%.

The current gross margin of the product is 69%.

The U.S. skincare market has been growing at an average rate of 4% over the past three years and is estimated to reach $11 billion in 2018.