Question: If you will please show me all the work - thank you You are considering a new product launch. The project will cost $1,282,500, have
If you will please show me all the work - thank you
| You are considering a new product launch. The project will cost $1,282,500, have a five-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 410 units per year; price per unit will be $20,300, variable cost per unit will be $16,800, and fixed costs will be $339,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 30 percent. |
| Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10 percent. |
| Required: |
| (a) | What are the best and worst case values for each of the projections? (Do not round intermediate calculations. Round your answers to the nearest whole number (e.g., 32) |
| Scenario | Unit sales | Variable costs | Fixed costs |
| Base | 410 | $16,800 | $339,000 |
| Best | |||
| Worst |
| (b) | What are the best- and worst-case OCFs and NPVs with these projections? (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) |
| OCF | NPV | |
| Best-case | $ | $ |
| Worst-case | $ | $ |
| (c) | What is the base-case OCF and NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| OCFbase | $ |
| NPVbase | $ |
| (d) | What is the OCF and NPV with fixed costs of $349,000 per year? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| OCF | $ |
| NPV | $ |
| (e) | What is the sensitivity of the NPV to changes in fixed costs? (Do not round intermediate calculations. Input the amount as a positive value. Round your answer to 2 decimal places (e.g., 32.16).) |
| For every dollar FC increase, NPV falls by $ . |
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