Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $33 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 1596 of the year's projected sales; for example, NWCo =15%( Sales1). The firm believes it could sell 895 units per year. The servers would sell for $34.75 thousand per unit and Webmasters believes that variable costs would amount to $17.5 thousand per unit. After Year 1. the sales price and variable costs will increase at the inflation rate of 2.0%. The company's nonvariable costs would be $1.7 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 eutire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The equipment would be depreciated over a 5-year period, using MACRS rates given in the Input Data section below. The estimated market value of the equipment at the end of the project's 4-year life is $3025 thousand. Webmasters' federal-plus-state tax rate is 25%. Its cost of capital is 12% for average-risk projects, defined as projects with a coefficient of variation of NPV between 1.5 and 2.5 . Low-risk projects are evaluated with a WACC of 6%, and high-risk projects at 18%. Develop a spreadsheet model using the input data below, and use it to find the project's NPV, IRR, MIRR, and payback, assuming this is an average risk project initially. + Replace values in yellow cells with formulas, Otherwise your sensitivity and scenario analyses will be incorrect, and you will lose points Intermediate Calculations Sales revenue Required level of net operating working capital Ending Book Value "Denote cash outflows as negative values and inflows as positive values. 6 Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $33 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 1596 of the year's projected sales; for example, NWCo =15%( Sales1). The firm believes it could sell 895 units per year. The servers would sell for $34.75 thousand per unit and Webmasters believes that variable costs would amount to $17.5 thousand per unit. After Year 1. the sales price and variable costs will increase at the inflation rate of 2.0%. The company's nonvariable costs would be $1.7 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 eutire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The equipment would be depreciated over a 5-year period, using MACRS rates given in the Input Data section below. The estimated market value of the equipment at the end of the project's 4-year life is $3025 thousand. Webmasters' federal-plus-state tax rate is 25%. Its cost of capital is 12% for average-risk projects, defined as projects with a coefficient of variation of NPV between 1.5 and 2.5 . Low-risk projects are evaluated with a WACC of 6%, and high-risk projects at 18%. Develop a spreadsheet model using the input data below, and use it to find the project's NPV, IRR, MIRR, and payback, assuming this is an average risk project initially. + Replace values in yellow cells with formulas, Otherwise your sensitivity and scenario analyses will be incorrect, and you will lose points Intermediate Calculations Sales revenue Required level of net operating working capital Ending Book Value "Denote cash outflows as negative values and inflows as positive values. 6