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 $900,000 to develop up front (year 0), and you expect revenues the first year of $810,000, 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 $96,000 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 9.9%? 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. CORO 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 3 4 5 $ 0 $ Revenues YOY growth Variable costs 1 2 810,000 $ 1,440,000 77.8% (40%) (40%) (40%) % of sales 50% 50% 50% 50% 50% Fixed costs Investment (900,000) (900,000) Total cash flows b. Plot the NPV profile for this investment using discount rates from 0% to 40% in 10% increments. The graph depicting the correct NPV profile is: (Select the best choice below.) OA. . NPV Profile NPV Profile 700,000 700.000 500.000 500.000 300,000 300.000 NPV ($ NPV ($) 100,000 100.000 115 16 -100,000 -100,000 -300,000 -300,000 Discount Rate (%) Discount Rate (%) c. What is the project's NPV if the project's cost of capital is 9.9%? The NPV is $. (Round to the nearest dollar.) 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. (For a zoom in on the NPV profile, click here.) Based on the NPV profile, the approximate internal rate of return is %. (Round to the nearest integer.) 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 $900,000 to develop up front (year 0), and you expect revenues the first year of $810,000, 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 $96,000 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 9.9%? 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. CORO 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 3 4 5 $ 0 $ Revenues YOY growth Variable costs 1 2 810,000 $ 1,440,000 77.8% (40%) (40%) (40%) % of sales 50% 50% 50% 50% 50% Fixed costs Investment (900,000) (900,000) Total cash flows b. Plot the NPV profile for this investment using discount rates from 0% to 40% in 10% increments. The graph depicting the correct NPV profile is: (Select the best choice below.) OA. . NPV Profile NPV Profile 700,000 700.000 500.000 500.000 300,000 300.000 NPV ($ NPV ($) 100,000 100.000 115 16 -100,000 -100,000 -300,000 -300,000 Discount Rate (%) Discount Rate (%) c. What is the project's NPV if the project's cost of capital is 9.9%? The NPV is $. (Round to the nearest dollar.) 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. (For a zoom in on the NPV profile, click here.) Based on the NPV profile, the approximate internal rate of return is %. (Round to the nearest integer.)