ou are CEO of Rivet Networks, maker of ultra-high performance network cards for gaming computers, and you are considering whether to launch a new product. The product, the Killer X3000, will cost $ 902 comma 000 to develop up front (year 0), and you expect revenues the first year of $ 798 comma 000, growing to $ 1.44 million the second year, and then declining by 40 % per year for the next 3 years before the product is fully obsolete. In years 1 through 5, you will have fixed costs associated with the product of $ 100 comma 000 per year, and variable costs equal to 50 % of revenues.

You are CEO of Rivet Networks, maker of ultra-high performance network cards for gaming computers, and you are considering whether to launch a new product. The product, the Killer X3000, will cost $902,000 to develop up front (year 0), and you expect revenues the first year of $798,000, growing to $1.44 million the second year, and then declining by 40% per year for the next 3 years before the product is fully obsolete. In years 1 through 5, you will have fixed costs associated with the product of $100,000 per year, and variable costs equal to 50% of revenues. a. What are the cash flows for the project in years 0 through 5? b. Plot the NPV profile for this investment using discount rates from 0% to 40% in 10% increments. c. What is the project's NPV if the project's cost of capital is 9%? d. Use the NPV profile to estimate the cost of capital at which the project would become unprofitable; that is, estimate the project's IRR. a. What are the cash flows for the project in years 0 through 5? Calculate the cash flows below: (Round to the nearest dollar.) 0 1 Revenues 0 $ 798,000 YOY growth Variable costs % of sales 50% Fixed costs Investment (902,000) (902,000) Total cash flows Enter any number in the edit fields and then click Check