I'm struggling with my homework this week.... i left the answers I came up with in some of the questions I sent, but only part of number 5 is correct. I used my BA II Plus calculator and cannot figure out where I am going wrong. Can someone help and what will it cost?

1) You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $1.45 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $1,550,000 on an aftertax basis. In four years, the land could be sold for $1,650,000 after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $130,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 4,300, 5,200, 5,800, and 4,700 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $700 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ feels that fixed costs for the project will be $450,000 per year, and variable costs are 20 percent of sales. The equipment necessary for production will cost $4 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $425,000. Net working capital of $130,000 will be required immediately and will be recaptured at the end of the project. PUTZ has a 35 percent tax rate, and the required return on the project is 12 percent. Assume the company has other profitable projects. Table 8.3. What is the NPV of the project? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).) NPV $ 2) Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 74,000 2 87,000 3 101,000 4 96,000 5 77,000 Production of the implants will require $1,530,000 in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are $1,430,000 per year, variable production costs are $230 per unit, and the units are priced at $345 each. The equipment needed to begin production has an installed cost of $20,300,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 25 percent of its acquisition cost. AAI is in the 30 percent marginal tax bracket and has a required return on all its projects of 19 percent. Table 8.3. What is the NPV of the project? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).) NPV $ What is the IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) IRR % 3) We are evaluating a project that costs $1,180,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 66,000 units per year. Price per unit is $45, variable cost per unit is $25, and fixed costs are $750,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your final answer to nearest whole number (e.g., 32).) Break-even point units b-1 Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places (e.g., 32.16).) Cash flow $ NPV $ b-2 What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your final answer to 3 decimal places (e.g., 32.161).) NPV/Q $ b-3 Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places (e.g., 32.16).) NPV would by $ c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to nearest whole number (e.g., 32).) OCF/VC $ 4) We are evaluating a project that costs $1,100,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 42,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $820,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 10 percent. Calculate the best-case and worst-case NPV figures. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places (e.g., 32.16).) NPV Best-case $ Worst-case $ 5) The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 60 percent chance of success. For $182,000, the manager can conduct a focus group that will increase the product's chance of success to 75 percent. Alternatively, the manager has the option to pay a consulting firm $397,000 to research the market and refine the product. The consulting firm successfully launches new products 90 percent of the time. If the firm successfully launches the product, the payoff will be $1.97 million. If the product is a failure, the NPV is zero. Calculate the NPV for each option available for the project. (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars (e.g. 1,234,567).) NPV Go to market now $ Focus group $ Consulting firm $ Which action should the firm undertake? Consulting firm Go to market now Focus group 3) We are evaluating a project that costs $1,180,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 66,000 units per year. Price per unit is $45, variable cost per unit is $25, and fixed costs are $750,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your final answer to nearest whole number (e.g., 32).) We first need to compute the depreciation: D = 1,180,000/10 = 118,000 Now, the accounting break even Q = (FC + D) / (P- VC) = (750,000 + 118,000) / (45 - 25) = 43,400 b-1 Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places (e.g., 32.16).) Sales = 45* 66,000 = 2,970,000 Cost = variable cost + fixed cost = (25*66000) + 750,000 = 1,650,000 + 750,000 = 2,400,000 Cash flow $ CF = (Sales - Costs) x (1-T) + Depr. x T CF = (2,970,000 - 2,400,000) x (0.65) + 118,000 x 0.35 CF = 411,800 NPV $ There is no salvage value and no change in NWC. To get NPV we use initial cash flow -1,180,000 followed by 10 cash flow of 411,800 each and discount rate of 15%. We get NPV = B3 B4 411800 B5 411800 E 3 -1,180,000 D5 15% B6 411800 B7 411800 B8 411800 B9 411800 B10 B11 B12 411800 411800 411800 411800 NPV = NPV(E5,B3:B12)+E3 = $ 886,728.92 b-2 What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your final answer to 3 decimal places (e.g., 32.161).) NPV/Q $ To calculate the sensitivity to quantity sold, repeat the above calculations for different value of Q, say Q = 67,000 we get B3 B4 424800 B5 424800 B6 424800 E 3 B8 424800 B9 424800 424800 B10 B11 B12 424800 424800 424800 -1,180,000 D5 B7 424800 15% NPV = NPV(E5,B3:B12)+E3 (using excel function) NPV = 951,972.91 NPV/Q $ (951,972.91 - 886,728.92) / (67,000 - 66,000) = 65.24 NPV/Q = $65.24 b-3 Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places (e.g., 32.16).) NPV would by $ In other words every additional unit sold, NPV increases by $65.24. A 500 decrease in the units decrease NPV by = 500 * 65.24 = 32621.99 NPV would decrease by $ 32,621.99 c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to nearest whole number (e.g., 32).) OCF/VC $ To compute the sensitivity of OCF to change in VC repeat the above calculations of OCF for different value of VC say VC = 24. We should find that OCF Sales = 45* 66,000 = 2,970,000 Cost = variable cost + fixed cost = (24*66000) + 750,000 = 1,584,000 + 750,000 = 2,334,000 Cash flow $ OCF = (Sales - Costs) x (1-T) + Depr. x T OCF = (2,970,000 - 2,334,000) x (0.65) + 118,000 x 0.35 OCF = 483,950 Thus the change in OCF per unit change in VC is (411,800 - 483,950)/(25-24) = -72,150 That is OCF decrease by $ 72,150 for every dollar decrease in VC 4) We are evaluating a project that costs $1,100,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 42,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $820,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 10 percent. Calculate the best-case and worst-case NPV figures. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places (e.g., 32.16).) Answer Net Present Value of a Project = Net Cash Inflows = Cash Inflows - Oulflows = (Sales) - (Variable cost + Fixed Cost + Depreciation + Tax) r = Required rate of return In our problem, all the estimates are valid within +/- 10%. So, Best outcome would be +10% Worst Outcome would be - 10 % Case 1 : Best outcome Sale = 42,000 (1.1) = 46,200 Selling Price = $50 (1.1) = $55 Variable Cost = $25(1.1) = $27.5 Fixed cost, although does not changes with the output, but as per the information, we will have to increase it by 10%. Fixed Cost = $820,000 (1.1) = $902,000 Depreciation as per straight line method = (Cost of the asset - salvage value) / Estimated useful life of the asset = ($1,100,000 - 0) / 10 = $110,000 Depreciation per year = $110000 Net cash inflows => Sales (46200*$55) $2,541,000 - Variable cost (46200*$27.5) ($1,270,500) - Fixed Cost ($902,000) - Depreciation ($110,000) --------------$258,500 ----------------- Tax @ 35% ($90,475) -------------------Net Cash Inflows $168,025 -------------------As depreciation is a non cash outflow, we will add back the amount to the net cash inflows. Net cash Inflows = $168,025 + $110,000 = $278,025 These cash inflows will form an annuity, for a period of 10 years. Present value on Annuity = I (PVIFAr%,n) (http://www.miniwebtool.com/pvifa-calculator/? r=10&n=10) = $278,025 ( 6.1446) = $1,708,352.41 Net Present Value = PV of Cash Inflows - Initial Outflow NPV = $1,708,352.41 - $1,100,000 = $608,352.41 Case 2 : Worst Outcome We will deduct all the figures by 10% Sale = 42000 (0.9) = $37,800 Selling Price = $50 (0.9) = $45 Variable Cost = $25(0.9) = $22.5 Fixed cost, although does not changes with the output, but as per the information, we will have to decrease it by 10%. Fixed Cost = $820,000 (0.9) = $738,000 Depreciation as per sttraight line method = (Cost of the asset - salvage value) / Estimated useful life of the asset = ($1,100,000 - 0) / 10 = $110,000 Depreciation per year = $110,000 Net cash inflows => Sales (37800*$45) $1,701,000 - Variable cost (37800*$22.5) ($850,500) - Fixed Cost ($738,000) - Depreciation ($110,000) --------------$2,500 ----------------- Tax @ 35% ($875) -------------------Net Cash Inflows $1,625 -------------------As depreciation is a non cash outflow, we will add back the amount to the net cash inflows. Net cash Inflows = $1,625 + $110,000 = $1,11,625 These cash inflows will form an annuity, for a period of 10 years. Present value on Annuity = I (PVIFAr%,n) (http://www.miniwebtool.com/pvifa-calculator/? r=10&n=10) = $111,625 ( 6.1446) = $685,890.97 Net Present Value = PV of Cash Inflows - Initial Outflow NPV = $685,890.97 - $1,100,000 = ($414,109) Case NPV Best Case $608,352.41 Worst Case ($414,109) 5) The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 60 percent chance of success. For $182,000, the manager can conduct a focus group that will increase the product's chance of success to 75 percent. Alternatively, the manager has the option to pay a consulting firm $397,000 to research the market and refine the product. The consulting firm successfully launches new products 90 percent of the time. If the firm successfully launches the product, the payoff will be $1.97 million. If the product is a failure, the NPV is zero. Calculate the NPV for each option available for the project. (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars (e.g. 1,234,567).) Go to market now $ NPV = Csuccess (Prob. Of Success) NPV = 1,970,000(0.60) NPV = 1,182,000 Focus group $ NPV = C0 + C Success (Prob. Of Success) NPV = -182,000 + 1,970,000(0.75) NPV = 1,295,500 Consulting firm $ NPV = C0 + C Success (Prob. Of Success) NPV = -397,000 + 1,970,000(0.90) NPV = 1,376,000 Which action should the firm undertake? Consulting firm Go to market now Focus group The firm undertake Consulting firm as the firm has highest NPV