Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need full answer by showing the table of npv based, worst case with full table, full answer and best case with full table. do not

image text in transcribed

need full answer by showing the table of npv based, worst case with full table, full answer and best case with full table. do not use excel table need simple table for solution. table of npv based, table of worst case and table of best case.

Part 3: Risk analysis and project evaluation 3.1 Perform a scenario analysis on the data provided Case Study: Assume that the company, where you are working as a team in Financial Department is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 650 000 unit per year at this price for a period of 4 years. Launching this project will require purchase of a $3 500 000 equipment that has residual value in four years of $500 000 and adding $ 850 000 in working capital which is expected to be fully retrieved at the end of the project. Other information is available below: Depreciation method: straight line Varloble cost per unit: $17 Cash fixed costs per year: $450 000 Discount rate: 10% Tax Rote: 30% Do a scenario analysis with cash flows of the assumed project to determine the sensitivity of the project's NPV to different scenarios that are defined in terms of the estimated values for each of the project's value drivers. Please work on two scenarios corresponding to the worst- ond best case outcomes for the project. You need to provide your results in (a) relevant tables: Worst case: Unit sales decrease by 20%; price per unit decreases by 20%; variable cost per unit Increases by 20 %; cash fixed cost per year increases by $100 000 Best case: Unit sales increase by 20%; price per unit increases by 20%, variable cost per unit decreases by 20%; cash fixed cost per year decreases by $100 000 Based on the scenario analysis outcome, draw relevant conclusion about project NPV's sensitivity. 3.2 Perform an NPV break-even analysis Perform an NPV break even analysis for the case where price per unit decreases by 20 % to identify the number of unit sales that is needed for the project to get break-even. | Trial and error method or What - If Analysis with excel spread sheet is to be used

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions