Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company is analyzing a proposed 3 year project using standard sensitivity analysis. The company expects to sell 1 5 , 0 0 0 units

A company is analyzing a proposed 3 year project using standard sensitivity analysis. The company expects to sell 15,000 units 5 percent. The expected variable cost per unit is $8 and the expected fixed costs are $40,000. The fixed and variable cost estimate are considered accurate within a 7 percent range. The sale price is estimated at 15 a unit, 6 percent. The project requires an initial investment of $120,000 for equipment that will be depreciated using the straight line method to zero over the project's life. The equipment can be sold for $30,000 at the end of the project. The project requires $12,000 in net working capital for the three years but will be fully recovered when the project closes. The discount rate is 16.4 percent and tax rate is 20 percent. What is the net present value for the optimistic scenario?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Strategic Public Finance

Authors: Stephen Bailey

1st Edition

0333922212, 978-033392221

More Books

Students also viewed these Finance questions

Question

Explain the nature of human resource management.

Answered: 1 week ago

Question

Write a note on Quality circles.

Answered: 1 week ago

Question

Describe how to measure the quality of work life.

Answered: 1 week ago