109,000 units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be $22 per unit and fixed costs, not including depreciation are forecast to be $1,080,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.5 million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $310,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here: Initial cost of the machine $9,500,000 Expected life 5 years Salvage value of the machine SO Working capital requirement $310,000 Depreciation method straight line Depreciation expense $1,900,000 per year Cash fixed costs excluding depreciation $1,080,000 per year Variable costs per unit $22 Required rate of return or cost of capital 10.4% Tax rate 34% Calculate the project's NPV. b. Determine the sensitivity of the project's NPV to a[n) 9 percent decrease in the number of units sold Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the price per unit. d. Determine the sensitivity of the project's NPV to a[n) 9 percent increase in the variable cost per unit. Determine the sensitivity of the project's NPV to a[n) 9 percent increase in the annual fixed operating costs. Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst- and best-case scenarios are listed here: R. e. Worst Case Best Case Expected or Base Case Unit Sales 109,000 Price per unit S98 Variable cost per unit S(22 Cash fixed cost per S(1,080,000) vear Depreciation Expense S(L.900,000) 77.390 586.24 S(2398) $(1,306,800 140,610 5118.58 S[19.80) S1950,400) $11.900.000) S(1.900.000) Date Your Name 109,000 units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be $22 per unit and fixed costs, not including depreciation, are forecast to be $1,080,000 per year. To manufacture this product, Blinkerial will need to buy a computerized production machine for $9.5 million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $310,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here: Initial cost of the machine $9,500,000 Expected life 5 years Salvage value of the machine SO Working capital requirement $310,000 Depreciation method straight line Depreciation expense $1,900,000 per year Cash fixed costs-excluding depreciation $1,080,000 per year Variable costs per unit $22 Required rate of return or cost of capital 10.4% Tax rate Calculate the project's NPV. b. Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the number of units sold. c. Determine the sensitivity of the project's NPV to a[n) 9 percent decrease in the price per unit. d. Determine the sensitivity of the project's NPV to a(n) 9 percent increase in the variable cost per unit. Determine the sensitivity of the project's NPV to a(n) 9 percent increase in the annual fixed operating costs. Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst- and best-case scenarios are listed here: Worst Case Best Case Expected or Base Case Unit Sales 109,000 Price per unit S98 Variable cost per unit (22) Cash fixed cost per S(1.080,000) 77,390 586.24 S123.98) 5(1,306,800 140.610 S118.58 S(19.80) S1950.400) Depreciation Expense S41.900.000) $(1.900,000) SC, 900,000) Date Your Name 109,000 units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be $22 per unit and fixed costs, not including depreciation, are forecast to be $1,080,000 per year. To manufacture this product, Blinkerial will need to buy a computerized production machine for $9.5 million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $310,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here: Initial cost of the machine $9,500,000 Expected life 5 years Salvage value of the machine SO Working capital requirement $310,000 Depreciation method straight line Depreciation expense $1,900,000 per year Cash fixed costs excluding depreciation $1,080,000 per year Variable costs per unit 522 Required rate of return or cost of capital 10.4% Tax rate 34% Calculate the project's NPV. b. Determine the sensitivity of the project's NPV to a[n) 9 percent decrease in the number of units sold. Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the price per unit. d. Determine the sensitivity of the project's NPV to a[n) 9 percent increase in the variable cost per unit. Determine the sensitivity of the project's NPV to a(n) 9 percent increase in the annual fixed operating costs. Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst- and best-case scenarios are listed here: a. c. e. Worst Case Best Case Expected or Base Case Unit Sales 109,000 Price per unit 598 Variable cost per unit (22) Cash fixed cost per S(1,080,000) Year Depreciation Expense $(1.900.000) 77.390 586.24 S(23.98) S(1,306,800 140.610 $118.58 S(19.80) S(950,400) SL.900,000) S(1.900.000)