Question
The Very-Shady Co. has a new project costing $27.6 million with an estimated life of 5 years. Sales are projected at 4.35 million units per
The Very-Shady Co. has a new project costing $27.6 million with an estimated life of 5 years. Sales are projected at 4.35 million units per year. The sales price is $84 per unit and variable costs will be $71.50 per unit. Fixed costs will be $43.65 million. The firm's tax rate is 40% and their required return is 13%.
A. Calculate the base-case cashflow and NPV
B. Calculate the sensitivity of NPV to a change in sales (3 decimal places in final answer)
C. If sales decreased by 850,000 units, what would the new NPV be?
D. If sales increased by 1.4 million units, what would the new NPV be?
E. Calculate the sensitivity of operating cash flow to changes in variable costs (3 decimal places in final answer).
F. If variable costs decreased by $3.75 per unit, what would the new OCF be?
G. If variable costs increased by $2.80 per unit, what would the new OCF be?
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