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Since (Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of a
Since (Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of a child's shoe, which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by 12 percent (either above or below), associated with this new product are shown here: this is a new product line, you are not confident in your estimates and would like to know how well you will fare if your estimates on the items listed above are 12 percent higher or 12 percent lower than expected. Assume that this new product line will require an initial outlay of $1.09 million, with no working capital investment, and will last for 10 years, being depreciated down to zero using straight-line depreciation. In addition, the firm's required rate of return or cost of capital is 9.5 percent, and the firm's marginal tax rate is 34 percent. Calculate the project's NPV under the "best-case scenario" (that is, use the high estimates-unit price 12 percent above expected, variable costs 12 percent less than expected, fixed costs 12 percent less than expected, and expected sales 12 percent more than expected). Calculate the project's NPV under the "worst-case scenario." The NPV for the best-case scenario will be $ (Round to the nearest dollar.) Data table Unit price: Variable costs: $129 $76 $254,000 per year Expected sales: Fixed costs: 10,000 per year (Click on the icon in order to copy its contents into a spreadsheet.) Print Done -
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