ThunderBlades Inc. Thunderblades Inc. has developed a powerful efficient snow remover that is significantly less polluting than existing snow removers currently on the market. The company spent $$2,000,000$ developing this product and the marketing department spent another $$300,000$ to assess the market demand. It would cost $$20$ million at Year $0$ to buy the equipment necessary to manufacture the efficient snow blower. The project would require net working capital at the beginning of each year equal to $20\%$ of sales $($NOWC$0=25\%($Sales$1),$ NOWC$1=25\%($Sales$2),$ etc.$).$The efficient snow blowers would sell for $$3,000$ per unit, and Thunderblades believes that variable costs would amount to $$790$ per unit. The company expects that the sales price and variable costs would increase at the inflation rate of $2\%$ after year $1.$ The company$$s non$-$variable costs would be $$800,000$ in Year $1$ and are expected to increase with inflation. The efficient snow blower project would have a life of $4$ years. If the project is undertaken, it must be continued for the entire $4$ years. Also, the project$$s returns are expected to be highly correlated with returns on the firm$$s other assets. The firm believes it could sell $5,000$ units per year. The equipment would be depreciated using a CCA rate of $30\%.$ The estimated market value of the equipment at the end of the project$$s $4-$year life is $$500,000.$ Thunderblades has other assets in this asset class. Thunderblades Inc.$$s federal$-$plus$-$provincial tax rate is $30\%.$ Its cost of capital is $9\%$ for average risk projects. Low$-$risk projects are evaluated with a WACC of $6\%,$ and high$-$risk projects at $12\%.$Thunderblades Inc

a$.$ Develop a spreadsheet model and use it to find the project's NPV$,$ IRR, and payback

b$.$ Conduct a sensitivity analysis to determine the sensitivity of NPV to changes in the sales price, variable

cost per unit and number of units sold. Set these variable values at $10\%,25\%$ above and below their base

levels. Include a graph in your analysis.

c$.$ Based on the foregoing, would you recommend that the project be accepted? Explain why?