$3.$com has developed a powerful new server that would be used for corporations internet activities. It would cost $ $6$ million to buy the equipment necessary to manufacture the server in year $0$ of the project; another $$30,000$ in shipping charges would be required; and it would cost an additional $$50,000$ to install the equipment. In addition to the $$6$ million new equipment to manufacture the server, a machine will be transferred to the project from another $3.$com facility. This machine has a re$-$sale value of $$1\mathrm{.}5$ million and a book value of $$0\mathrm{.}5$ million. If the machine is kept rather than sold, its remaining book value can be depreciated equally over $4$ years. When the project is shut down in year $5,$ this machine will have a salvage value of $$0\mathrm{.}5$ million. The equipment will be installed in a building owned by the firm and located in Houston, Texas. This building, which is vacant now and the land can be rented at $$20,000$ annually before tax. The project would require a net working capital at the beginning of each year that is estimated to be around $15\%$ of sales. The servers are expected to sell for $$35,000$ per unit in year $1,$ and $3.$com believes that variable costs are going to be roughly a round $$15,500$ per unit. After year $1,$ the sales price will remain the same, while the and variable costs are projected to increase at the inflation rate of $5\%.$ The companys non$-$variable $($fixed costs$)$ is going to be $$1\mathrm{.}3$ million in year $1,$ and then it will increase by inflation thereafter. The server project would have a life of $5$ years. If the project is undertaken, it must be continued for the entire $5$ years. Moreover, the projects returns are expected to be highly correlated with the returns on the firms other assets. The firm believes that it could sell $4,000$ units per year. $10\%$ of the sales come from customers who would have purchased an existing server. These servers currently sell for $$7,000$ per unit and the variable costs of producing these old fashion servers is roughly a round $$4,500$ per unit. The new equipment for producing the server would be depreciated equally over the $5-$year period of the project. The estimated market value of the equipment at the end of the projects $5-$year life is $$1000,000\mathrm{.}3.$com federal tax rate is $25\%.$ Its cost of capital is $12\%$ for average risk projects. Low risk projects are evaluated with a WACC of $9\%.$ High risk projects are assessed at a WACC of $15\%.$A$.$Develop a spreadsheet model and use it to find the projects NPV$,$ IRR and payback period.$(30$ Marks$)$B$.$Compute the breakeven point for the following variables: equipment costs, selling quantity, selling price and variable cost. $($at the Breakeven point of the variable NPV $=0)(15$ Marks$)$C$.$ Construct a one$-$way data table with $10$ values to assess the sensitivity of the NPV to changes in the equipment costs, changes in the selling price, changes in the selling quantity, changes in Cannibalism, changes in inflation rates, changes in the cost of capital, and changes in the variable costs of new servers? Produce Graphs of NPV against these variables to depict the relationship? $(15$ Marks$)$D$.$Rank these variables according to its importance in influencing the NPV$?(15$ Marks$)$ E$.$You are unsure about sales and the risk of the project. Assume that the true WACC lies between $7\%$ and $15\%.$ Now, construct two$-$way data tables to assess the sensitivity of NPV to changes in the cost of capital with sales? $(5$ Marks$)$F$.$Assume the following scenarios: Best Case Scenario: Sales Price $20\%,$ Sales Quantity $20\%,$ Variable Costs of new servers $-20\%,$ Equipment Costs $-20\%,$ WACC $=7\%$ Worst Case Scenario: Sales Price $-20\%,$ Sales Quantity $-20\%,$ Variable Costs $20\%,$ Equipment Costs $20\%,$ WACC $=15\%$Compute the NPV under each scenario and then construct a horizontal bar graph that shows the NPV under: Best Case Scenario, Base Scenario, Worst Case Scenario $(10$ Marks$)$G$.$Based on the analysis above, provide some recommendation regarding the implementation of this project.