$($SHOW ALL WORK$)$ Nacirema Desserts Inc. has developed a new ice cream machine, the Coldplay

Shiver, that is rarely out of service $($unlike the one at your favourite, local burger

joint$).$

Nacirema's finance department believes that demand will be strong for the new

machine, so they are working on a feasibility study.

To manufacture an initial run of this machine, the firm will invest $$750,000$ for

manufacturing equipment, which should last six years, with straight$-$line depreciation

and no salvage value. The tax rate would be $30\%.$ The initial selling price for a

Coldplay Shiver is expected to be $$12,000.$ Expected variable cost per Shiver is

$$5000.$ Expected fixed costs, such as rent, utilities, and salaries, but excluding tax$-$

deductible depreciation expense, would be $$250,000$ per year.

Address the following questions independently from one another. Refer to the

original information given in the paragraphs above to answer each.

a$.$ Determine the number of unit sales needed for a breakeven operating profit.

$(4$ marks$)$

b$.$ Assuming you could sell $60$ Shivers per year, what would be the net present

value at a $15\%$ discount rate?

$(8$ marks$)$

c$.$ Is your NPV decision in $($b$)$ consistent or inconsistent with the breakeven

finding in $($a$)?$ Explain why.

$(3$ marks$)$

d$.$ Assuming you could sell $60$ Shivers per year, what would be the payback

period for the initial investment?

$(5$ marks$)$

e$.$ Assuming you could sell $60$ Shivers per year, what would be your internal rate

of return $($IRR$)?$

$(5$ marks$)$

f$.$ Assuming you could sell $60$ Shivers per year, what would your selling price

have to be to generate a net present value of $$150,000$ at a $15\%$ discount

rate?

$(8$ marks$)$

g$.$ If you could sell $60$ Shivers in the first year and your sales volume increased

by $5\%$ each year until the end of Year six, what would the net present value

be at a $15\%$ discount rate?

h$.$ Considering your answers to the previous questions, is this project an

acceptable investment? Explain why.