Suppose, we can sell 50,000 cans of shark attractant per year at a price of $4.00 per can. It costs us about $2.50 per can to make the attractant. A new product such as this one typically has only a three-year life. We require a 20% return on new products. Fixed costs for the project will run $12,000 per year. We will need to invest a total of $90,000 in manufacturing equipment. For simplicity, we will assume that this $90,000 will be fully depreciated over the three year life of the project. The project will require an initial $20,000 investment in net working capital. The tax rate is 34%. Questions: 1. Set-up the problem below in the space provided. Calculate the NPV. Calculate the IRR. 2. Do a Scenario Analysis with the three following scenarios: a. Best Case - Price per can $6, Cost per can $1.50 b. Base Case - Price per can $4, Cost per can $2.50 c. Worst Case - Price per can $4, Cost per can $3.50 3. Do a Sensitivity Analysis where you vary the number of cans from 20,000 to 80,000. 4. Do the following break-even analyses using the base case: a. Break-even price so that NPV = 0 b. Break-even quantity so the NPV = 0 c. Break-even cost per can so that NPV = 0

latAraig View Share Window Help Excel Assignment 02-2 2 Table Chart Text Sheet1 Number of cans Price per can Cost per can Fixed Cost Tax rate Discount rate Initial Investment 50000 2.5 12000 34% 20% 90000 Revenue COGS Gross Profit Fixed Cost EBITDA Depreciation EBIT Tax Net Income 200,000 125,000 75,000 12,000 63,000 NCS (90,000) ANWC CFFA (20,000) 20,000 Hint: It should be $10,648 for the Base Case. NPV IRR