Question: You are considering a new product launch. The project will cost $980,000, have a 5-year life, and have no salvage value: depreciation is straight-line to

You are considering a new product launch. The project will cost $980,000, have a 5-year life, and have no salvage value: depreciation is straight-line to zero. Sales are projected at 370 units per year. price per unit will be $15.975. variable cost per unit will be $12.100. and fixed costs will be $635,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 25 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.) Answer is complete and correct. Variable Costs Scenario Base Best Unit Sales 370 $ S Fixed Costs 635,000 671,600 698,500 12,100 10,890 13.310 407 Worst 333 What are the best-case and worst-case OCFs and NPVs with these projections? (A negatlve answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Answer is not complete. OCF NPV Best-case IS 3.246.857 Worst-case IS -292,538 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.) Answer is not complete. Base-case OCF Base-case NPV IS 1,356,120.28 What are the OCF and NPV with fixed costs of $645,000 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... 32.18.) Answer is not complete. 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., 32.10.) Answer is complete and correct. For every dollar FC increases NPV fails by 2.70
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
