Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Could you show the calculations properly for the financial calculator please? Sensitivity analysis 2. You are considering a new product launch. The project will have
Could you show the calculations properly for the financial calculator please?
Sensitivity analysis 2. You are considering a new product launch. The project will have an initial cost for fixed assets of $1,150,000, a five-year life, and no salvage value; depreciation is straight-line to zero. Sales are projected at 230 units per year, price per unit will be $7,500, variable cost per unit will be $3,900, and fixed costs will be $122,000 per year. The required return is 14.5 percent and the relevant tax rate is 24 percent. a. Based on your experience, you think the unit sales and price are accurate within a 2 percent range while costs may vary by 3 percent. What is the sensitivity of NPV to changes in the unit sales? What is the sensitivity of NPV to changes in the price per unit? Which variable has higher forecasting risk? b. Based on your experience, you think the unit sales and price are accurate within a 3 percent range while costs may vary by 5 percent. What is the sensitivity of NPV to changes in the price per unit? What is the sensitivity of NPV to changes in the unit sales? Which variable has higher forecasting riskStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started