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Narrative Industries, Inc. is a newly created firm that came into existence through an equity spin- off from Ocean Capital- a private equity firm specializing in technology recapitalizations. Narrative developed a specialization in artificial intelligence (AT) and robotics capabilities (RC) and is headquartered in Lexington, Kentucky Currently, Narrative has hired a technology and AI related consulting firm Quantifier, Inc. to build unit sales projections for the company. This is expected to give the company insight into quickly evolving markets and changes therein to assist in corporate planning for possible new investments. After diligent research, Quantifier established pro forma projections for Narrative's only product -Mequafir (due to the special dynamics of A/I and RC, the firm focuses its efforts and resources on a single product line). which cover the following five years: 177,389 units 231,335 units 259,450 units 221,900 units 186,850 units ear ear ear ear ear Such estimates established by Quantifier are based on the premise that the current average selling price (ASP) of $567 per unit holds for the first two years and a subsequent reduction to $415 per unit prevails in years three through five. To derive an estimate for terminal cash flows to Narrative, it is assumed that unit sales will decline by an average of 4.35% per year starting in the terminal time per year lasting indefinitely thereafter. Because of expected competitive pressures, the ASP is expected to decline by 6% per year starting in the terminal period with the trend expected to continue indefinitely thereafter The Special Task Force for Internal Corporate Finance Issues has cost accounting and engineering studies that Narrative is able to produce its Mequafir product at a variable cost approximating $67/unit. Due to a tight labor market and resource constraints nationwide, the VC cost/unit is expected to rise by 2.85% per year for the first 5 years and increase by an average of 3.55% per year starting in the terminal time period with an indefinitely continuing trend thereafter. Due to growing capacity needs, Narrative's total annual fixed costs are projected to start at $15,879,000 annually and grow by an estimated 3.79% per year indefinitely into the future d through various To maintain market advantage well into the future, necessary capital expenditures for the firm are projected to be an initial $31,667,000 up front for which an IRS ruling requested by the company places such an investment in the five-year MACRS depreciation schedule. The market