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 $890,000 to develop up front (year O), and you expect revenues the first year of $605,000 growing to $1.48 million the second year, and then declining by 40% per year for the next 3 years before the product is fully obsoleto. In years 1 through 5, you will have fixed costs associated with the product of S102,000 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 o through 5? Calculate the cash flows below: (Round to the nearest dollar.) 5 (40%) 55% 0 1 2 2 3 4 Revenues $ 0 $ 305.000 S 1,480,000 YOY growth 83.99 % (40%) (40%) Variable costs II % of sales 55% 55% 55% 55% Fixed costs Investment (890,000) Total cash flows (890,000) . . 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 Q NPV Profile Q 700.000 1 700.000 1 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 $890,000 to develop up front (year O), and you expect revenues the first year of $605,000, growing to $1.48 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 S102,000 per year, and variable costs equal to 55% of revenues. a. What are the cash flows for the project in years 0 through S? 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. OB NPV Profile NPV Profile 700.000 700 000 a 500.000 500 000 . 300.000 300.000 100.000 100 000 10 15 IN 25 30 4h 5 10 25 361 4h - 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 retum is %. (Round to the nearest integer.)