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

$899,000

to develop up front (year 0), and you expect revenues the first year of

$808,000,

growing to

$1.53

million the second year, and then declining by

45%

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

$104,000

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

10.8%?

d. Use the NPV profile to est

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
Revenues	$0	$808,000
YOY growth
Variable costs
% of sales		55%
Fixed costs		104000
Investment	(899,000)
Total cash flows	(899,000)