A five-year project is being considered for investment. The product is expected to sell for $500...

Transcribed Image Text:

A five-year project is being considered for investment. The product is expected to sell for $500 and the demand is expected to grow at 10% per year for the next five years. The production volume will initially be 10,000 units. The variable costs are $244/unit, and the fixed costs are $1.3 million. The capital investment required is $3,500,000. The tax rate is 30%. The company's discount rate is 10%. Determine the sensitivity of the NPV to the following inputs: a) Growth in demand b) Initial production volume c) Price d) Capital investment e) Tax rate f) Discount rate g) Fixed costs h) Variable costs A five-year project is being considered for investment. The product is expected to sell for $500 and the demand is expected to grow at 10% per year for the next five years. The production volume will initially be 10,000 units. The variable costs are $244/unit, and the fixed costs are $1.3 million. The capital investment required is $3,500,000. The tax rate is 30%. The company's discount rate is 10%. Determine the sensitivity of the NPV to the following inputs: a) Growth in demand b) Initial production volume c) Price d) Capital investment e) Tax rate f) Discount rate g) Fixed costs h) Variable costs

Answer rating: 100% (QA)

ANSWER The sensitivity of the Net Present Value NPV to the inputs is determined by analyzing the imp... View the full answer