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The answer I got is wrong. please explain the steps when you follow through. Can you please tell me when do I use the tax
The answer I got is wrong. please explain the steps when you follow through. Can you please tell me when do I use the tax shield and when to apply the after-tax and pre-tax depreciation?
You are considering a new product launch. The project will cost $875,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 190 units per year; price per unit will be $19,200, variable cost per unit will be $15,100, and fixed costs will be $345,000 per year. The required return on the project is 11 percent, and the relevant tax rate is 35 percent. Requirement 1: Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10 percent. (a) What are the best and worst case NPVs with these projections? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) NPV best NPV worst $ 1,909,98 $ 509,332. (b) What is the base-case NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV base $ 237714.5 Requirement 2: What is the sensitivity of the NPV to changes in fixed costs? (Do not round intermediate calculations. Input the amount as a positive value. Round your answer to 2 decimal places (e.g., 32.16).) For every dollar FC increase, NPV falls by $Step by Step Solution
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