References Maring View Draw Design Time - 10 3 Document Title Design Layout Otel 9 A A EE.. wie A. Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer. These scanners are expected to sell for an average price of $98 each, and the company analysts performing the analysis expect that the firm can sell 104,000 units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be $19 per unit and fixed costs, not including depreciation, are forecast to be $1,060,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.9 million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $305,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here: Initial cost of the machine $9.900,000 5 Expected life years Salvage value of the machine $0 Working capital requirement $305,000 Depreciation method straight line $1,980,000 Depreciation expense per year Cash fixed $1,060,000 costs-excluding per year depreciation Variable costs per unit $19 Required rate of return or cost of capital 10.8% Tax rate 34% 9 ABD a. Calculate the project's NPV. b. Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the number of units sold. c. Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the price per unit. d. Determine the sensitivity of the project's NPV to a(n) 9 percent increase in the variable cost per unit. e. Determine the sensitivity of the project's NPV to an) 9 percent increase in the annual fixed operating costs. f. Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst- and best-case scenarios are listed here: Expected or Base Case Worst Case Best Case Unit sales 104.000 74,880 133,120 Price per unit $98 $86.24 $119.56 Variable cost per unit $(19) S(21.09) $(17.29) Cash fixed costs per year $(1,060,000) $(1.250 800) $(954,000) Depreciation expense $(1,980,000) $(1,980,000) $(1,980,000)