Question
1. We are evaluating a project that costs $983,000, has a 9-year life, and has no salvage value. Assume that depreciation is straight-line to zero
1. We are evaluating a project that costs $983,000, has a 9-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 106,995 units per year. Price per unit is $52, variable cost per unit is $31, and fixed costs are $928,000 per year. The tax rate is 37%, and we require a 12 % return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-14 percent.
What is the best-case NPV?
2. We are evaluating a project that costs $980,000, has a 9-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 111,094 units per year. Price per unit is $55, variable cost per unit is $38, and fixed costs are $922,000 per year. The tax rate is 37%, and we require a 12 % return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-14 percent.
What is the worst-case NPV?
3. We are evaluating a project that costs $982,000, has a 9-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 103,110 units per year. Price per unit is $58, variable cost per unit is $26, and fixed costs are $922,000 per year. The tax rate is 37%, and we require a 12 % return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-14 percent.
What is the accounting break-even quantity?
4. We are evaluating a project that costs $984,000, has a 9-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 109,568 units per year. Price per unit is $57, variable cost per unit is $31, and fixed costs are $921,000 per year. The tax rate is 37%, and we require a 12 % return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-14 percent.
What is the financial break-even quantity?
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
