Answered step by step
Verified Expert Solution
Link Copied!

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

image text in transcribed

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 risk

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

Advances In Entrepreneurial Finance

Authors: Rassoul Yazdipour

2011th Edition

148998190X, 978-1489981905

More Books

Students also viewed these Finance questions

Question

Show that (y v2) if x y or x 2.

Answered: 1 week ago