Question: Problem 9-23 Project Analysis [LO 21 You are considening a new product launch. The project will cost $1,212,500, have a five-year life, and have no

Problem 9-23 Project Analysis [LO 21 You are considening a new product launch. The project will cost $1,212,500, have a five-year life, and have no salvage value; depreciation is straight-ine to zero. Sales are projected at 270 units per year, price per unit wil be $18,900, variable cost per unit wil be $15,400 and foxed costs will be $325,000 per year. The required retum on the project is 13 percent, and the relevant tax rate is 40 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 What are the best-case and worst case values for each of the projections? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Unt Sales Variable CostsFixed Coss Bara 270 15,400 325,000 Worst What are the best-case and worst-case OCFs and NPVs with these projections? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) Besi-case Worst-case What are the base-case OCF and NPV? (Do not round intermediate calculations. Round your OCF answer to the nearest whole number, e.g., 32, and round your NPV answer to 2 decimal places, e.g., 32.16.) What are the OCF and NPV with fxed costs of $335,000 per year? (Do not round intermediate calculations. Round your OCF answer to the nearest whole number, e.g., 32, and round your NPV answer to 2 decimal places, e.g., 32.16.) OCF NPV What is the sensitivity of your base-case NPV to changes in fixed costs? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) For every dollar FC increases, NPV falls by S
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
