Question
You are called by Hope Van Dyne to determine whether a new Pym technology for miniaturized food delivery is economically desirable. This project will require
You are called by Hope Van Dyne to determine whether a new Pym technology for miniaturized food delivery is economically desirable. This project will require $35,000,000 in equipment to infuse food with modified Pym particles.
Installing and calibrating the equipment to begin operations will cost an additional $2,500,000. This equipment is categorized as a seven-year MACRS property. The project will bring a revenue of $28,000,000 in the first year.
After that, the revenue will grow 10% every year as more people take a liking to miniature food. The main cost of this project is the salary of lab technicians, which in the first year adds up to $5,000,000. The salary of these workers will increase with the general inflation rate of 2% every year.
In addition to this, rent and utilities cost $5,000,000 every year. This cost is expected to stay constant. The project is expected to last six years, at the end of which all the equipment can be sold for 12% of its original value.
Complete a sensitivity analysis and focus on the worker's salary and the size of the initial market as the variables of interest. Is the size of the initial market or the workers salary more important to the financial achievability of the project? Also find the break-even value for the two variables, please show calculations!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started