The TitMar Motor Company is considering the production of a new personal transportation vehicle (PTV). The PTV
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Share (%) * market size and units sold = revenues/ price per unit. The project offers an expected NPV of $ 9,526,209 and an IRR of 39.82%. Given TitMar’s stated hurdle rate of 18%, the project looks like a winner. Even though the project looks very good based on management’s estimates, it is risky and can turn from a positive NPV investment to a negative one with relatively modest changes in the key value drivers. Develop a spread-sheet model of the project valuation and answer the following questions:
a. If the firm’s market share turns out to be only 5%, what happens to the project’s NPV and IRR?
b. If the market share remains at 15% and the price of the PTV falls to $ 4,500, what is the resulting NPV?
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Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
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