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 $898,000 to develop up front (year 0), and you expect revenues the first year of $802,000, growing to $1.41 million the second year, and then declining by 35% 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 55% 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 10.4%? 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 2 3 4 5 Revenues 0 $ 802,000 $ 1,410,000 YOY growth 75.8% (35%) (35%) (35%) Variable costs 55% 55% 55% 55% 55% % of sales Fixed costs Investment (898,000) (898,000) 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. B. NPV Profile NPV Profile 700,000 700,000 500,000 500,000 LY 300,000 300,000 NPV ($) NPV ($) 100,000 100,000 5 16 15 26 25 30 35 40 5 10 20 25 30 35 40 -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 10.4%? 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.) NPV Profile 200,000 100,000 NPV ($) 5 16 15 26 30 35 40 - 100,000 -200,000 Discount Rate (%)