JD Sdn Bhd has developed a new hand blender that would be used for woodwork and carpentry activities. It would cost RM1 million to buy the equipment necessary to manufacture the blenders, and initially it would require net operating working capital equal to 10% of the 1st year sales. The project would have a life of 5 years. If the project is undertaken, it must be continued for the entire 5 years. After the first year, JD intends to increase the sales price by 5% annually. The firm believes it could sell 7,000 units per year. The blenders would sell for RM230 per unit, and JD believes that variable costs would amount to RM175 per unit. The companys fixed costs would be RM120,000 at Year 1 and would increase with inflation at a rate of 4% annually. The variable costs will also increase at the inflation rate of 4%. The equipment would be depreciated over a 5-year period, using the straight-line method. The annual depreciation will be calculated based on a salvage value of the equipment at the end of the projects 5-year life of RM60,000. The company however estimated the machine can be sold as scrap for RM70,000. The corporate tax rate is 25%. The projects returns are expected to be highly correlated with returns on the firms other assets. The cost of capital is 10%.

a. Develop a spreadsheet model and use it to find the projects NPV, IRR, and payback.