For a new product, sales volume in the first year is estimated to be 80,000 units and

Question:

For a new product, sales volume in the first year is estimated to be 80,000 units and is projected to grow at a rate of 4% per year. The selling price is $ 12 and will increase by $ 0.50 each year. Per unit variable costs are $ 3, and annual fixed costs are $ 400,000. Per unit costs are expected to increase 5% per year. Fixed costs are expected to increase 8% per year. Develop a spreadsheet model to calculate the net present value of profit over a 3 year period, assuming a 4% discount rate. , suppose that the first- year sales volume is normally distributed with a mean of 100,000 units and a stan-dard deviation of 10,000. Use the NORM. INV func-tion and a one- way data table to conduct a Monte Carlo simulation to find the distribution of the net present value profit over the 3- year period.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Monte Carlo simulation
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