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please answer both for thumbs up! We are evaluating a project that costs $2,190,000, has a 8-year life, and has no salvage value. Assume that
please answer both for thumbs up!
We are evaluating a project that costs $2,190,000, has a 8-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 91,200 units per year. Price per unit is $38.97, variable cost per unit is $24.05, and fixed costs are $866,000 per year. The tax rate is 22 percent, and we require a return of 11 percent on this project. a. Calculate the base-case operating cash flow and NPV. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the sensitivity of NPV to changes in the sales figure? Note: Do not round intermediate calculations and round your answer to 3 decimat places, e.g., 32.161. c. If there is a 350-unit decrease in projected sales, how much would the NPV change? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16. d. What is the sensitivity of OCF to changes in the variable cost figure? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. e. If there is a $1 decrease in estimated variable costs, how much would the OCF change? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. Parker \& Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $8.3 million in anticipation of using it as a warehouse and distribution site, but the company has: since decided to rent facilities elsewhere. If the land were sold today, the company would net $11.1 million. The company now wants to bulld its new manufacturing plant on this land; the plant will cost $22.3 million to bulld, and the site requires $980,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number. e.g., 1,234,567 Step by Step Solution
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