You are evaluating the HomeNet project under the following assumptions: new tax laws allow 100% bonus depreciation (all the depreciation expense, $7.5 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 and assuming a cost of capital of 12%, calculate the following: a. The break-even annual sales price decline if: sales of 50,000 units in year 1 increase by 51,000 units per year over the life of the project, the year 1 sales price is $260/unit, and the year 1 cost of $120/unit decreases by 21% annually. See b. The break-even annual unit sales increase if: sales are 50,000 units in year 1, the year 1 sales price of $260/unit, decreases by 12% annually and the year 1 cost of $120/unit decreases by 21% annually. See. a. The break-even annual sales price decline if: sales of 50,000 units in year 1 increase by 51,000 units per year over the life of the project, the year 1 sales price is $260/unit, and the year 1 cost of $120/unit decreases by 21% annually. See The break-even annual sales price decline is%. (Round to two decimal places.) Using the browser's print option may create an undesirable printout. Use the Print option in your question instead to get a in order to copy its contents into a spreadsheet.) Year better print out. the following icon Incremental Earnings Forecast ($000s) 1 Sales 2 Cost of Goods Sold HomeNet Units Sales (000s) Sales Price ($/unit) Cost of Goods Sold ($/unit) Operating Expenses ($000s) Hardware & Software Develop. Marketing & Technical Support Capital Expenditures Lab Equipment Depreciation Corporate Tax Rate 20% (Click on the following icon in order to copy its contents into a spreadsheet.) 3 Gross Profits 4 Selling, General, and Administrative 5 Research and Development 6 Depreciation 7 EBIT 8 Income Tax at 20% 9 Unlevered Net Income Free Cash Flow ($000s) 10 Plus: Depreciation 11 Less: Capital Expenditures 12 Less: Increases in NWC 13 Free Cash Flow (Click on the following icon Net Present Value ($000s) 1 Free Cash Flow 51 12% 21% 2 Project Cost of Capital 12% 3 Discount Factor 4 PV of Free Cash Flow 5 NPV 0 Year (15,000) (7,500) 100% 20% 0 (15,000) (7,500) (22,500) 4,500 (18,000) 7,500 (7,500) 1 0 (18,000) (2,800) 1 50 260 120 (1,050) (18,000) 2,310 in order to copy its contents into a spreadsheet.) Year 1 2 101 228.80 94.80 2,310 2 (2,800) (2,800) 20% 3 152 201.34 74.89 2 3 1.000 0.8929 0.7972 (18,000) 2,063 6,064 11,215 20% 13,000 23,109 30,604 35,968 (6,000) (9,575) (11,383) (12,009) 7,000 13,534 19,221 23,959 (2,800) (2,800) (2,800) (2,800) 4 4,200 10,734 16,421 21,159 (840) (2,147) (3,284) 3,360 8,587 13,137 203 177.18 59.16 3 (2,800) 4 20% (980) (854) (710) 7,607 12,283 16,217 (4,232) 16,927 4 7,607 12,283 16,217 0.7118 0.6355 8,743 10,306 5 5 3,594 3,594 5 3,594 0.5674 2,039