You are developing a business case for a project to add new functionality to an existing product. You have estimated th

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You are developing a business casefor a project to add new functionality to an existingproduct. You have estimated that the required initialinvestment is $1,000,000 and an additional investment of $400,000is required in Year 1. You have also worked with themarketing group to estimate the expected revenues, as shown in thetable below. The company applies 20% hurdle rate for thesetypes of investments.
1) Based on this information, you need to calculate the NPVfor this project. What is the NPV? Please show your work byinserting Excel analysis. Also, assuming that NPV is the onlycriteria for your recommendation, would you recommend funding theproject?
2) Senior management of the company is now concerned aboutthe high inflation rate as the economy falters. The COO hasasked you to re-analyze NPV with an assumption of an annualinflation rate of 3.5%. What is the revised NPV? Wouldyou recommend funding the project? Please show your work byinserting Excel analysis