Start with the partial model in the file Ch$13$ P$18$ Build a Model.xlsx$.$ Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $$12$ million at Year $0$ to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to $11\%$ of the year's projected sales; for example, NWC$0=11\%($Sales$1).$ The servers would sell for $$25,000$ per unit, and Webmasters believes that variable costs would amount to $$18,000$ per unit. After Year $1,$ the sales price and variable costs will increase at the inflation rate of $3\%.$ The company's nonvariable costs would be $$1$ million at Year $1$ and would increase with inflation.

The server project would have a life of $4$ years. If the project is undertaken, it must be continued for the entire $4$ years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell $1,000$ units per year.

The equipment would be depreciated over a $5-$year period, using MACRS rates. The estimated market value of the equipment at the end of the project's $4-$year life is $$600,000.$ Webmasters.com's federal$-$plus$-$state tax rate is $25\%.$ Its cost of capital is $11\%$ for average$-$risk projects, defined as projects with a coefficient of variation of NPV between $0\mathrm{.}7$ and $1\mathrm{.}3.$ Low$-$risk projects are evaluated with a $7\%$ project cost of capital and high$-$risk projects at $15\%.$

The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.