Q6 Ans: The $500,000 spent for developing the prototype of the lazy mower is considered as sunk cost in the

report because the amount can not be recovered. Q7

Ans: we accept the project having highest NPV.

Q8 Ans: NPV shows that how sensitive the projects NPV is towards the cost of Capital. Q 10 Ans:The other type of contingencies Dan and Ron should include in the report are as follows : 1)Additional expenses: Dan and Ron should analyze the expenses that effects their business. 2)Additional costs: They should analyze the additional cost that effect their business and how they can reduce unnecessary cost. 3)Break even Analysis: They should analyze break even analysis that whether their project is breakeven on the basis of cash flows or not and what will be the steps they take to handle this situations. 4)More investments: They should consider more investments if there is need of it which inturn helps to increase their business. 5)Cost minimization: They should analyze the factor of cost minimization in case of excessive inventory and incase of different operations.

EXCUTIVE SUMMARY
The Innovative products incorporation is known for its useful and unique products .The company came up with new ideas and products in the midst of economic adversity. Due to their lower revenues and profit margins the engineers tried hard to develop a prototype of profitable unique product. So they design their latest innovation which is the remote controlled lawn mower named as lazy mower. The companys marketing department conducted surveys that reflects that by reducing the prices the demand would be increased. After proper testing the product was launched at various home shows nationwide which in turns received appreciable response. As the production was not fully started, the new CEO had join the company. During the leadership of new CEO the design team had presented a detailed study about cost and revenues estimates to the capital investment committee (CIC) which was supervised by vice president of finance, Pete fieldstone. The head of the design team Dan Conklin had covered every possible factor and prepared himself for a tough and demanding question and for the answer session at the next committee meeting. The assistant of Dan, Ron howard who was Chartered financial analyst (CFA) hired by CPC indicates all i s and cross all the T s, for this purpose Ron and dan collect necessary information including proforma statement variable cost, fixed cost and net cash flows over the economic lifeof the project with appropriate supporting documentation break even analysis sensitivity of cash flows and scenarios of sales growth and profit margins. The marketing department prepared table which shows expected unit sales of lazy mower over its10 year life. The unit price which is $1000 reduce to $ 900 per unit due to competitive pressures. The department also considers the cost of equipment including the various expenses incurred onit$20million estimated that after 10 years the machine was sold of $4million.The manufacturing was done on unused plant of the firm .The plant location was leased for $ 10000 per month. Fixed cost were estimated to be$1500000 per year and the variable cost per unit were expected to be$400.The additional inventory was required of$500000 The company increased it account payable by $600000 and its account receivable by $1000000. Both dan and ron also estimated that the net working capital of the firm would be 5% of sales and the weighted average cost of the capital was to be 14%, The interest expense on debt would be raised to $400000 per year and the tax rate was expected to remain same at 34%.