Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Just answer B to D - 2 . Table is entered correctly. You are considering o new product launch. The project will cost have e

Just answer B to D-2. Table is entered correctly.
image text in transcribed

You are considering o new product launch. The project will cost have e four- year life, and heve no salvage value; depreciation is straight-line to zero. Sales ere projected at 330 units per year; price per unit will be $19,600, variable cost per unit will be $14,000, end fixed costs will be S720,OOO per year. The required return on the project is 10 percent, and the relevant tax rete is 21 percent. e. Based on your experience, you think the unit soles, variable cost, and fixed cost projections given here are probably accurete to within percent What are the upper end lower bounds for these projections? What is the base-case NPV? What ere the best-case end worst-case scenarios? (A negative answer should be indicated by minus sign. Do not round intermediate calculations. Round your NPV answers to 2 decimal places, e.g., 32.16. Round your other answers to the nearest whole number, e.g. 32.) Scenario Base Unit Sales 330 Variable Cost 14,000 12,600 15,400 s Fixed Costs 720,000 648: ooo 792, ooo 865,81265 b. c. Evaluate the sensitivity of your base-case NPV to changes in fixed costs. (A negative answer should be indicated by minus sign. Do not round intermediate calculations end round your answer to 2 decimal places, e.g., 32.16.) What is the cash break-even level of output for this project (ignoring taxes)? (Do not round intermediate calculations end round your answer to 2 decimal places, e.g., 32.16.) dl. What is the accounting break-even level of output for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d2. What is the degree of operating leverage et the accounting break-even point? (Do not round intermediate calculations end round your answer to 3 decimal places, e.g., 32.161.) b. ANPV/LFC c. Cash break-even d-l. Accounting break-even d-2. Degree of operating leverage

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

Public Finance In Canada

Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon

5th Canadian Edition

1259030776, 978-1259030772

More Books

Students also viewed these Finance questions