[SOLVED] If there was one thing the folks

If there was one thing the folks at Creative Products Corporation (CPC) knew well, it was how to come up with useful and unique products in the midst of economic adversity. With current year revenues considerably lower and profit margins shrinking due to severe price competition, the firm’s engineers had been pushed hard to develop a prototype of a useful, and hopefully highly profitable, “unique” product. Last month, the design team unveiled a fully tested, prototype of their latest innovation, a remote- controlled lawn mower, the “Lawn Robot.”
Surveys of retailers and customers conducted by the marketing depart- ment indicated that demand would be excellent, provided the price was lower than a riding lawn mower. The testing and development phases took almost three years and the final product passed all safety hazard tests with flying colors. After the unveiling, the product was exhibited at various home shows nationwide and received rave reviews. Full production had not yet started, however, because there had been a change in CEOs, and the new CEO was highly conservative.
Before being given the “go ahead” to go into full-scale production of the Lawn Robot, the design team had to present a detailed feasibility study to the Capital Investment Committee (CIC), which was chaired by the Vice President of Finance, Bill Burton. As was typical in a major under- taking of this type, the proposal had to include detailed cost and revenue estimates with sufficient documentation to substantiate the numbers.
Having been involved with more than a few of these kinds of proposals before, the head of the design team, Matt Robichek, knew that he had better take every possible factor into consideration and be prepared for a tough and demanding question and answer session at the next committee meeting. Luckily for Matt, his assistant, Chris Robinson, who had recently earned his chartered financial analyst (CFA) designation, was an experi- enced and dependable employee. Prior to being hired by CPC three years ago, Chris had worked for another large engineering company for over 10 years. “Chris, we have to dot all the ‘i’s’ and cross all the ‘t’s’ on this one!” said Matt. “Or else the big guys are going to tear us apart, because we’re talking major dollars here. Their main question is going to be, is it really worth it?”
So Matt and Chris began collecting the necessary information. They knew that to have a comprehensive feasibility study they would have to include the following:
Pro forma statements showing expected annual revenues, variable costs, fixed costs, and net cash flows over the economic life of the project with appropriate supporting documentation.
Break-even analysis.
Sensitivity of the cash flows to alternative scenarios of sales growth and profit margins.
Based on the data provided by the marketing department, they prepared Table 1, showing the expected unit sales of the Lawn Robot over its 10-year economic life and the expected selling price per unit. Note that the price of $1,000 per unit…………..

Prepare a pro forma statement showing the annual cash flows resulting from the Lawn Robot project.
Use a scenario analysis to show how the cash flows would change if the sales forecasts were 15% worse (pessimistic) and 15% better (optimistic) than the stated forecast (base).
Realizing that the CIC will demand some kind of sensitivity analyses, how should Matt and Chris prepare their report? Which variables or inputs obviously need to be analyz- ed using multiple values? Explain by performing suitable calculations.
How should the interest expenses be treated? Explain.
Using the base case estimates calculate the cash, accounting, and financial break-even of the Lawn Robot project. Interpret each one.
Say the company spent $500,000 in developing the prototype of the Lawn Robot. How should Matt and Chris treat this item in their report? Explain.
Calculate the IRR of the project. Based on your calculations what would you recommend? Why?
How sensitive is the net present value of the project to the cost of capital?
Calculate the operating leverage entailed by this project. What does it indicate?
What other types of contingency planning should Matt and Chris include to make the report comprehensive? Please ex- plain the relevance of each suggestion.

Question: If there was one thing the folks