Question: Family Security is considering introducing tiny GPS trackers than can be inserted in the sole of a child's shoe, which would then allow for the

 Family Security is considering introducing tiny GPS trackers than can be

Family Security is considering introducing tiny GPS trackers than can be inserted in the sole of a child's shoe, which would then allow for the tracking of that child it he or she was ever lost or abducted. The estimates, that might he off by 10% (either above or below), associated with this new product are: Ttiariable costs: Fixed costs: Since this is a new product line, you are not condent in your estimates and would like to know how well you will fare it your estimates on the items listed above are 10% higher or 10% lower than expected. Assume that this new product line will require an initial outlay of $1 million, with on working capital inveshnent, and will last for 10 years, being depreciated down to zero using straight line depreciation. In addition, the rm's required rate of return or cost of capital is 10%, while le rm's marginal tax rate is 34% 1. Calculate the project's litiP'i.IT under the "bestcase scenario\" {that is, use the high estimates unit price 10% above expected, variable costs 10% less than expected xed costs 10% less than expected, and expected sales 10% more than expected). 2. Calculate the project's l'iiP'i.IT under the "worstcase scenario\". 3. Explain the importance of your analysis and results. Explain the importance of risk analysis in the capital budeetineinanrial planning decisionmaking process

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