You are evaluating the HomeNet project under the following assumptions:

Sales of $50,000$ units in year $1$ increasing by $53,000$ units per year over the

life of the project, a year $1$ sales price of $$260/$unit$,$ decreasing by $11\%$

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\mathrm{.}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?