Data Case Chapter 7: You have just been hired by Dell Computers in its capital budgeting division.

Data Case Chapter 7: You have just been hired by Dell Computers in its capital budgeting division. Your first assignment is to determine the net cash flows and NPV of a proposed new type of portable computer system similar in size to a Blackberry handheld, but which has the operating power of a high-end desktop system.Development of the new system will initially require an investment equal to 10% of net property, plant, and equipment (PPE) for the fiscal year ended Feb. 1, 2008. The project will then require an additional investment equal to 10% of the initial investment after the first year of the project, a 5% of initial investment after the second year, and 1% of initial investment after the third, fourth, and fifth years. The product is expected to have a life of five years. First-year revenues for the new product are expected to be 3% of total revenue for Dell's fiscal year ended Feb. 1, 2008. The new product's revenues are expected to grow at 15% for the second year, then 10% for the third, and 5% annually for the final two years of the expected life of the project. Your job is to determine the rest of the cash flows associated with this project. Your boss has indicated that the operating costs and net working capital requirements are similar to the rest of the company's products and that depreciation is straight-line for capital budgeting purposes. Welcome to the "real world." Since your boss hasn't been much help, here are some tips to guide your analysis:1.