Please run a net present value breakeven using this original data and record the net present value level of sales here ___________. Prior to beginning this project, the company can increase the initial outlay by $150,000. This additional upfront acquisition stage cost would lower the variable costs to 30% of sales and increase the disposition value to $550,000. What is the new net present value____________, and the new net present value breakeven level of sales___________, and would this be a good move for the company?

Please go back to the original spreadsheet numbers. As an alternative before beginning this project, the company can reduce the initial outlay by $300,000. This would increase the variable costs to 50% of sales and decrease the disposition value to $400,000. What is the new net present value____________, and the new net present value breakeven level of sales___________, and would this be a good move for the company?

Going back to the prior two problems which of these alternatives is better for the company? The original method, the modification suggested in problem 1, or the modification in problem 2? Why?

 

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Years 3 Acquisition stage cash flow: Initial Outlay (800,000) Operating stage cash flow: Sales 600,000 600,000 600,000 600,000 Fixed Cost (220,000) (220,000) (240,000) (68,000) (220,000) (220,000) Variable Cost (240,000) (68,000)| (240,000) (68,000)| (240,000) (68,000) Depreciation expense Taxable income 72,000 72,000 72,000 72,000 (20,160)| 51,840 Тахes (20,160)| (20,160) (20,160) After tax income 51,840 51,840 51,840 Add back depreciation 6৪,000 68,000 68,000 68,000 Operating cash flows 119,840 119,840 119,840 119,840 Disposition stage cash flow: Total cash flow (800,000) 119,840 119,840 119,840 119,840 Present Value 872,591 Net Present Value 72,591 Years 3 Acquisition stage cash flow: Initial Outlay (800,000) Operating stage cash flow: Sales 600,000 600,000 600,000 600,000 Fixed Cost (220,000) (220,000) (240,000) (68,000) (220,000) (220,000) Variable Cost (240,000) (68,000)| (240,000) (68,000)| (240,000) (68,000) Depreciation expense Taxable income 72,000 72,000 72,000 72,000 (20,160)| 51,840 Тахes (20,160)| (20,160) (20,160) After tax income 51,840 51,840 51,840 Add back depreciation 6৪,000 68,000 68,000 68,000 Operating cash flows 119,840 119,840 119,840 119,840 Disposition stage cash flow: Total cash flow (800,000) 119,840 119,840 119,840 119,840 Present Value 872,591 Net Present Value 72,591

Answer rating: 100% (QA)

Sales is the variable which has the greatest influence on the NPV of the project 81 To breakeven using the original data the annual sales must be at 5... View the full answer