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Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer.

Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer. These scanners are expected to sell for an average price of $101each, and the company analysts performing the analysis expect that the firm can sell 108,000 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 $1,040,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.3 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 $307,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here: LOADING... .
a.Calculate the project's NPV.
b.Determine the sensitivity of the project's NPV to a(n)11 percent decrease in the number of units sold.
c.Determine the sensitivity of the project's NPV to a(n)11 percent decrease in the price per unit.
d.Determine the sensitivity of the project's NPV to a(n)11 percent increase in the variable cost per unit.
e.Determine the sensitivity of the project's NPV to a(n)11 percent increase in the annual fixed operating costs.
f.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: LOADING... .

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