Question: Hello! I need assistance with this practice problem. Basically all of my answers were incorrect. You are CEO of Rivet Networks, maker of ultra-high performance

Hello! I need assistance with this practice problem. Basically all of my answers were incorrect.

Hello! I need assistance with this practiceHello! I need assistance with this practiceHello! I need assistance with this practice
You are CEO of Rivet Networks, maker of ultra-high performance network cards for gaming computers, and you are considering whether to launch a new product. The product, the Killer X3000, will cost $900,000 to develop up front (year 0), and you expect revenues the first year of $800,000, growing to $1.50 million the second year, and then declining by 40% per year for the next 3 years before the product is fully obsolete. In years 1 through 5, you will have fixed costs associated with the product of $100,00 per year, and variable costs equal to 50% of revenues. a. What are the cash flows for the project in years 0 through 5? b. Plot the NPV profile for this investment using discount rates from 0% to 40% in 10% increments. c. What is the project's NPV if the project's cost of capital is 10%? d. Use the NPV profile to estimate the cost of capital at which the project would become unprofitable; that is, estimate the project's IRR. Calculate the cash flows below: (Round to the nearest dollar.) 0 2 3 4 5 Revenues $ 0 $ 800,000 $ 1,500,000 YOY growth 87.5% (40%) (40%) (40%) Variable costs % of sales 50% 50% 50% 50% 50% Fixed costs Investment 900,000) Total cash flows (900,000)b. Plot the NPV profile for this investment using discount rates from 0% to 40% in 10% increments. The graph depicting the correct NPV profile is: (Select the best choice below.) O A. O B. NPV Profile NPV Profile 700,000 700,000 500,000- 500,000- 300,000- 300,000- NPV ($) NPV ($) 100,000- 100,000- -100,000- 15 20 25 30 35 40 -100,000- 10 15 20 35 40 -300,000- -300,000- Discount Rate (%) Discount Rate (%)c. What is the project's NPV if the project's cost of capital is 10%? The NPV is $ . (Round to the nearest dollar.) d. Use the NPV profile to estimate the cost of capital at which the project would become unprofitable, that is, estimate the project's IRR. (For a zoom in on the NPV profile, click here () Based on the NPV profile, the approximate internal rate of return is |%. (Round to the nearest integer.)

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