Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Compute the expected NPV, the standard deviation of the NPV and the NPV breakeven point of this project. Please explain the steps thank you!! XYZ

Compute the expected NPV, the standard deviation of the NPV and the NPV breakeven point of this project. Please explain the steps thank you!!

image text in transcribed

XYZ Inc is looking at a project to manufacture widgets. Assume we have the following data: - The initial cost of the project is $810,000. - The project is expected to last 10 years, at which time the project will be abandon. - Assume each widget will cost $7.00 each to produce and the selling price will be $9.80. Production fixed costs are expected to be $186,300 annually. - The company has computed that the PVCCATS associated with this project will be $105,300. Also, the company uses a discount rate of 9% for capital projects and XYZ pays tax at a rate of 9%. XYZ is unsure as to how many widgets they will sell annually. The marketing department has provided that the expected number of units sold annually, N is E(N)=137,000 units with a standard deviation of =19,000 units. (a) Compute the expected NPV, E(NPV) of this project. (b) Compute the standard deviation of the NPV of this project. (c) Compute the NPV breakeven point of this project. units. XYZ Inc is looking at a project to manufacture widgets. Assume we have the following data: - The initial cost of the project is $810,000. - The project is expected to last 10 years, at which time the project will be abandon. - Assume each widget will cost $7.00 each to produce and the selling price will be $9.80. Production fixed costs are expected to be $186,300 annually. - The company has computed that the PVCCATS associated with this project will be $105,300. Also, the company uses a discount rate of 9% for capital projects and XYZ pays tax at a rate of 9%. XYZ is unsure as to how many widgets they will sell annually. The marketing department has provided that the expected number of units sold annually, N is E(N)=137,000 units with a standard deviation of =19,000 units. (a) Compute the expected NPV, E(NPV) of this project. (b) Compute the standard deviation of the NPV of this project. (c) Compute the NPV breakeven point of this project. units

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

The Palgrave Handbook Of Technological Finance

Authors: Raghavendra Rau, Robert Wardrop, Luigi Zingales

1st Edition

3030651169, 978-3030651169

More Books

Students also viewed these Finance questions

Question

7. Define cultural space.

Answered: 1 week ago

Question

8. Describe how cultural spaces are formed.

Answered: 1 week ago