I. Instructions: This case is designed to be an excel spreadsheet case. Please show your work by

using formulas and cell references in excel. Use the excel spreadsheet template that is available on

Canvas, under Assignments, for more details. You may round to two decimal places in your calculations.

Suppose Nautical Adventures, Inc., is considering the following project $($all dollar figures are in

thousands of dollars$).$

$$ In year $0,$ the project requires an $$11,500$ investment in plant and equipment. This

equipment is depreciated using the straight$-$line method over seven years, and has a

salvage value $($after$-$tax$)$ of $$1,200$ in year $7.$

$$ The project is expected to generate sales of $3,000$ units in year $1.$ Details on the annual unit

sales are given in the spreadsheet template, highlighted in yellow.

$$ Sales revenue per unit is forecast to be $$10\mathrm{.}00$ in year $1$ and then grow with inflation.

$$ Variable cost per unit is forecast to be $$8\mathrm{.}00$ in year $1$ and then grow with inflation.

$$ Cash fixed costs are forecast to be $$5,280$ in year $1$ and then grow with inflation.

$$ The inflation rates that apply each year $($to sales, VC$,$ and FC$)$ are shown in the spreadsheet.

$$ The company uses a $10\%$ discount rate to evaluate new product decisions.

$$ The tax rate is forecast to be a constant $24\mathrm{.}0\%.$

$$ The project will require working capital in the amount of $$0\mathrm{.}90$ in year $0$ for every unit of

next year's forecasted sales, and this amount $)$ will grow with inflation going forward.