NanoMedia is a player of the social media business and it is considering entering the software business launching new apps for the creation of emotional video. The initial investment for the project is expected to be $4 million, depreciable straight line over a lifetime of 4 years to a salvage value of zero. The tax rate is 40% and the company faces a cost of capital of 11% whereas the cost of capital for software companies is 13%. The project is expected to generate revenues of $5 million each year for the next four years with an EBITDA margin (EBITDA/ sales) of 25%. a. Estimate the NPV of this investment. b. Assume that the project is eligible for accelerated depreciation over a 2-year period to a salvage value of zero, instead of four years, with depreciation of $2.5 million in year 1 and $1.5 million in year 2. Assuming that the project life stays at 4 years and all of the other inputs are unchanged, how much will the NPV change if NanoMedia switches depreciation methods? c. After the decision to reject the project, you have collected two years of information on earnings, dividends, net capex as well as the cash balance at the end of each year. F The firm has no working capital needs, no issues/retirement of bonds/stocks and plans to stop paying dividends immediately. It expects earnings from the most recent year to grow 10% a year for the next 2 years but net capital expenditures (capital expenditures-depreciation) from the most recent year are expected to grow 20% a year for the next 2 years. If the firm plans a major stock buyback two years from now, estimate the cash balance it will have available for the stock buyback. d. Starting from information provided in point c., now assume that the company wants to maintain its current payout ratio and reduce its cash balance from $60 million to $40 million, how much stock (in dollar terms) can it buy back next year