(Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk analysis) 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 $102 each, and the company analysts performing the analysis expect that the firm can sell 105,000 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 $1,070,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $10.9 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 $304,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here:

see chart 1

.

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 a(n) 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: see chart 2

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