Question: show all work in excel TSKH Inc. is considering the manufacture of a new widget. Equipment necessary for production will cost $10 million and it

 show all work in excel TSKH Inc. is considering the manufacture

show all work in excel

TSKH Inc. is considering the manufacture of a new widget. Equipment necessary for production will cost $10 million and it will be depreciated on a straight-line basis over the eight-year life. The salvage value is estimated to be $2 million at the end of eight years. The widget will retail for $122. The company expects to sell 190,000 widgets per year. Fixed costs will be $1,100,000 per year and variable costs are $20 per widget. Production will require an investment in net working capital of $700,000. The tax rate is 30 percent. a) Perform a scenario analysis using 10 percent, 15 percent, and 20 percent cost of capital. Calculate IRR and NPV for each case. b) Conduct sensitivity analysis using sales price and variable costs. (Show how NPVs are changing when you change the sales numbers and variable cost)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!