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 $?$

The project is expected to generate sales of $3,000$ units in year $1.$ Details on the annual un 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{.}00im$ 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 $$0\mathrm{.}90in$ year $0$ for every unit of next year's forecasted sales, and this amount $($ $$0\mathrm{.}90)$ will grow with inflation going forward.

What is the project's NPV$?$ What is the IRR? Would you accept this project?

Suppose you need to do some sensitivity analysis $($please show on separate worksheet tab$)$:

$($a$)$ What if the firm suspects that this project is riskier than the firm's average project and decides to increase the cost of capital to $13\%.$ What is the NPV$?$

$($b$)$ What if the firm fears that its variable costs may be higher than estimated? What if the variable cost$/$unit starts off at $$8\mathrm{.}40$ in year $1,$ and then grows with inflation $-$ what is the NPV$?($assume the original cost of capital of $10\%)$