Suppose that Linksys is considering the development of a wireless home networking appliance, called HomeNet. Based on extensive marketing surveys, the sales forecast for HomeNet is 61.000 units per year. Given the pace of technological change. Linksys expects the product will have a five-year life and an expected wholesale price of $280 (the price Linksys will receive from stores). Actual production will be outsourced at a cost (including packaging) of $142 per unit. Linksys must also establish a new lab for testing purposes. They will rent the lab space, but will need to purchase 88.7 million of new equipment. The equipment will be depreciated using the straight-line method over a 7-years life. Linksys' marginal tax rate is 34%. The lab will be operational at the end of one year. At that time, HomeNet will be ready to ship. Linksys expects to spend $3.3 million per year on rental costs for the lab space, as well as rent marketing and support for this product. HomeNet project has risks similar to its existing projects, for which it has a cost of capital of 10.5% Scenario 1: Calculate Incremental Cash Flow and NPV under the conditions provided in the case. Scenario 2: Suppose that HomeNet will have no incremental cash or inventory requirements (products will be shipped directly from the contract manufacturer to customers). However, receivables related to HomeNet are expected to account for 22% of annual sales, and payables are expected to be 16% of the annual cost of goods sold (COGS). Calculate incremental cash flow and NPV. Scenario 3: Suppose the equipment is depreciated using the MACRS method over a 7-years life and thus allows for larger depreciation deductions earlier in the asset's life as given below: Year 0 1 2 3 4 5 6 7 % 14.29 24.49 17.49 12.49 8.93 8.92 8.93 4.46 Calculate incremental cash flow and NPV. Scenario 4: Linksys sells the lab equipment for 3.5 million in the beginning of Year 6. Calculate incremental cash flow and NPV. Use MACRS method as given in Scenario 3