Linksys plan to implement a new product, HomeNet. The project has an estimated life of six years. Revenue Estimates: Sales = 50,000 units/year Per Unit Price = $250 Cost Estimates: Up-Front R&D = $12,000,000 Up-Front New Equipment = $7,000,000 Per Unit Cost = 5110 Expected life of the new equipment is six years. Annual Overhead = $2,500,000 Implementation of the HomeNet project will cause an increase in receivables as 12% of Sales and an increase in payables as 10% of COGS. The cost of capital for this project is estimated as 10%. Tax is 40% 1. Calculate NPV of HomeNet project. Prepare an excel file for your calculations and explain your solutions in a textbox. 2. Keeping the underlying assumptions the same, recalculate unlevered net income and NPV for following alternatives a. After looking at the projections of the HomeNet project, you decide that they are not realistic. It is unlikely that sales will be constant over the six-year life of the project. Furthermore, other companies are likely to offer competing products, so the assumption that the sales price will remain constant is also likely to be optimistic. Finally, as production ramps up, you anticipate lower per unit production costs resulting from economies of scale. You therefore decide to redo the projections under the following assumptions: Sales of 50,000 units in year 1 increasing by 51,000 units per year over the life of the project, a year 1 sales price of $250/unit, decreasing by 10% annually and a year 1 cost of $100/unit decreasing by 11% annually. In addition, new tax laws allow you to depreciate the equipment, over four rather than six years using straight-line depreciation. b. Recalculate unlevered net income and NPV assuming, in addition, that each year 20% of sales comes from customers who would have purchased an existing Cisco router for $100/unit and that this router costs $60/unit to manufacture. c. Company could produce each unit in-house for $95 if it spends $5 million upfront to change the assembly facility (versus $110 per unit if outsourced). The in-house manufacturing method would also require an additional investment in inventory equal to one month's worth of production. (use