You are evaluating the HomeNet project under the following assumptions: Sales of 50,000 units in year 1 increasing by 46,000 units per year over the life of the project, a year 1 sales price of $260/unit, decreasing by 10% annually and a year 1 cost of $120/unit decreasing by 19% annually. In addition, new tax laws allow 100% bonus depreciation (all the depreciation expense, $120 million, occurs when the asset is put into use, in this case immediately). Research and development expenditures total $15 million in year 0 and selling, general, and administrative expenses are $2.8 million per year (assuming there is no cannibalization). Also assume 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 15% of annual sales, and payables are expected to be 15% of the annual cost of goods sold. Under these assumptions, the unlevered net income, net working capital requirements and free cash flow are shown in the table: a. Using the FCF projections given, calculate the NPV of the HomeNet project assuming a cost of capital of 10%, 12% and 14%. b. What is the IRR of the project in this case? Free Cash Flow Table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 01 2 3 4 5 a. Using the FCF projections given, calculate the NPV of the HomeNet project assuming a cost of capital of 10%, 12% and 14%. The NPV of the FCF's of the HomeNet project assuming a cost of capital of 10% is $ (Round to the nearest thousand dollars. HomeNet Units Sales (000s) Sales Price (S/unit) Cost of Goods Sold (S/unit) Operating Expenses (5000s) Hardware & Software Develop. Marketing & Technical Support Capital Expenditures Lab Equipment Depreciation Corporate Tax Rate 46 50 96 10% 19% 260 120 234.00 97.20 142 210.60 78.73 188 189.54 63.77 (15,000) (2,800) (2,800) (2,800) (2,800) (7,500) 100% 20% 20% 20% 20% 20% (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 2 3 4 5 Incremental Earnings Forecast ($000s) 1 Sales 13,000 2 Cost of Goods Sold 3 Gross Profits 4 Selling, General, and Administrative 22,464 29,905 35,634 (6,000) (9,331) (11,180) (11,989) 7,000 13,133 18,725 23,645 (2,800) (2,800) (2,800) (2,800) 5 Research and Development (15,000) 7 EBIT 9 Unlevered Net Income 6 Depreciation 8 Income Tax at 20% Free Cash Flow ($000s) 10 Plus: Depreciation 11 Less: Capital Expenditures (7,500) (22,500) 4,200 10,333 4,500 (840) (18,000) 3,360 15,925 20,845 (2,067) (3,185) (4,169) 8,266 12,740 16,676 7,500 (7,500) 12 Less: Increases in NWC 13 Free Cash Flow (1,050) (920) (18,000) 2,310 (839) 7,346 11,901 (738) 3,547 15,938 3,547