Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
Comprehensive risk analysis) Blinkeria is considering introducing a new line of hand scanners that can be used to copy materials and then download it into
- Comprehensive risk analysis) Blinkeria is considering introducing a new line of hand scanners that can be used to copy materials and then download it into a personal computer. These scanners are expected to sell for an average price of $100 each, and the company analysts performing the analysis expect that the Firm can sell 100,000 units per year at this price for a period of seven 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 $27.5 per unit while cash fixed costs, not including depreciation, are forecast to be $1,259,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.75 million that has residual value of $600,000 and will have an expected life of seven years. In addition, the firm expects it will have to invest an additional $300,000 in working capital to support the new business.
Initial Cost of Machine | $9,750,000 |
Expected Life | 7 Years |
Salvage Value of Machine | $600,000 |
Working Capital Requirements | $300,000 |
Depreciation Method | MACRS 5 |
Cash Fixed Costs Excluding Depreciation | $1,259,000 |
Required Rate of Return | 9.45% |
Variable Cost of Production per Unit | $27.5 |
Tax Rate | 33% |
Use Scenario Analysis to evaluate the Projects NPV (Use Spreadsheet) under different scenarios (Base, Worst and Best)
Base Case | Worst Case | Best Case | |
Unit Sales | 100,000 | 80,000 | 125,000 |
Sale Price per Unit | $100.00 | $75.00 | $115.00 |
Variable Cost per Unit | $27.5 | $37.5 | $21.5 |
Cash Fixed Costs per Year | $1,259,000 | $1,375,000 | $$875,000 |
Depreciation Expense | MACRS | MACRS | MACRS |
Salvage Value of Machine | $600,000 | $450,000 | $750,000 |
Can you help me to do in excel but with the formulas and be clear with your answers. Tahnks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started