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QUESTION 1: (50 marks) You have just been hired by Hewlett-Packard (HP) 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 an iPhone, 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 October 31, 2020. The project will then require an additional investment equal to 10% of the initial investment after the first year of the project, 5% of the initial investment after the second year, and 1% of the 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 HP's fiscal year ended October 31, 2020. 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: a) Obtain Hewlett-Packard's financial statements. Download or copy paste the annual income statements, balance sheets, and cash flow statements for the last four fiscal years (2017 - 2020) from Yahoo finance. Enter Hewlett-Packard's ticker symbol (HPQ) and then go to "Financials." Click "Annual," to ensure you're getting annual data. (10 marks) QUESTION 1: (50 marks) You have just been hired by Hewlett-Packard (HP) 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 an iPhone, 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 October 31, 2020. The project will then require an additional investment equal to 10% of the initial investment after the first year of the project, 5% of the initial investment after the second year, and 1% of the 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 HP's fiscal year ended October 31, 2020. 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: a) Obtain Hewlett-Packard's financial statements. Download or copy paste the annual income statements, balance sheets, and cash flow statements for the last four fiscal years (2017 - 2020) from Yahoo finance. Enter Hewlett-Packard's ticker symbol (HPQ) and then go to "Financials." Click "Annual," to ensure you're getting annual data. (10 marks)

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