You are evaluating the HomeNet project under the followingassumptions: new tax laws allow100% bonus depreciation(all the depreciationexpense, $7.5 million, occurs when the asset is put intouse, in this caseimmediately). Research and development expenditures total $15 million in year 0 andselling, general, and administrative expenses are $2.8 million per year(assuming there is nocannibalization). Also assume HomeNet will have no incremental cash or inventory requirements(products will be shipped directly from the contract manufacturer tocustomers). However, receivables related to HomeNet are expected to account for 15% of annualsales, and payables are expected to be 15% of the annual cost of goods sold. Under these assumptions and assuming a cost of capital of 14%, calculate:

a. Thebreak-even annual sales price declineif: sales of 50,000 units in year 1 increase by 54,000 units per year over the life of theproject, the year 1 sales price is $260/unit, and the year 1 cost of $120/unit decreases by 21% annually.