Equipment Pretax salvage value R&D Marketing study $ $ $ $ 32,500,000 3,500,000 750,000 200,000 Year 3 108,000 Year 4 94,000 Year 5 57,000 Sales (units) Sales of old PDA Lost sales Depreciation rate Year 1 65,000 80,000 15,000 14.29% Year 2 82,000 60,000 15,000 24.49% 17.49% 12.49% 8.93% Price 500 VC 215 Tax rate NWC percentage Required return 4,300,000 35% 20% 12% Year 1 Year 2 Year 3 Year 4 Year 5 Sales VC Fixed costs Dep EBT Tax +Dep OCF NWC Beg End NWC CF Net CF Salvage BV of equipment Taxes Salvage CF Cash flow a. Profitability index b. IRR c. NPV d. Price per unit NPV 400 420 430 440 ANPV/APrice To find the sensitivity of the NPV to changes in quantity, we need to change the quantity sold manually since the quantity sold is different each year. If we add 100 units to each year's qauntity sold, the NPV is: NPV ANPV/AQuantity Equipment Pretax salvage value R&D Marketing study $ $ $ $ 32,500,000 3,500,000 750,000 200,000 Year 3 108,000 Year 4 94,000 Year 5 57,000 Sales (units) Sales of old PDA Lost sales Depreciation rate Year 1 65,000 80,000 15,000 14.29% Year 2 82,000 60,000 15,000 24.49% 17.49% 12.49% 8.93% Price 500 VC 215 Tax rate NWC percentage Required return 4,300,000 35% 20% 12% Year 1 Year 2 Year 3 Year 4 Year 5 Sales VC Fixed costs Dep EBT Tax +Dep OCF NWC Beg End NWC CF Net CF Salvage BV of equipment Taxes Salvage CF Cash flow a. Profitability index b. IRR c. NPV d. Price per unit NPV 400 420 430 440 ANPV/APrice To find the sensitivity of the NPV to changes in quantity, we need to change the quantity sold manually since the quantity sold is different each year. If we add 100 units to each year's qauntity sold, the NPV is: NPV ANPV/AQuantity