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Bourque Enterprise is considering a new four - year project. The company bought some land a year ago for $ 2 0 0 , 0
Bourque Enterprise is considering a new fouryear project.
The company bought some land a year ago for $ in anticipation of using it as a manufacturing production site. Based on a recent appraisal, the company believes it could sell the land for $ on an aftertax basis. In four years, the land could be sold for $ after taxes.
The company projects unit sales as follows at a price of $ per unit.
Year Unit sales
Total fixed costs are $ per year, and the variable product costs will be percent of sales. The plant and equipments required for the project will cost $ A fiveyear MACRS depreciation is used. At the end of the project, these fixed assets can be sold for $ before tax.
The project will require net operating working capital equal to percent of sales that must be accumulated in the year prior to sales, to support inventory and the credit sales to customers.
The tax rate is percent. The required return is percent. Decision rules
Calculate the NPV IRR and payback years.
NPV $
IRR
Payback years
years. Sensitivity analysis
What is the NPV sensitivity to the unit price P
NPV sensitivity to P: $ I need help on how NPV IRR, Payback years, and NPV sensitivity to P was calculated. Please show your work. Thanks!
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