Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are considering a new product launch. The project will cost $880,000, have a 4-year life, and have no salvage value; depreciation is straight-line to
You are considering a new product launch. The project will cost $880,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 270 units per year; price per unit will be $16,265, variable cost per unit will be $11,600, and fixed costs will be $585,000 per year. The required return on the project is 10 percent, and the relevant tax rate is 25 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to I within +10 percent. What are the best-case and worst-case values for each of the projections? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Scenario Unit Sales 270 Variable Costs 11,600 Fixed Costs 585,000 Base $ $ Best Worst What are the best-case and worst-case OCFs and NPVs with these projections? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) OCF N PV Best-case Worst-case What are the base-case OCF and NPV? (Do not round intermediate calculations. Round your OCF answer to the nearest whole number, e.g., 32, and round your NPV answer to 2 decimal places, e.g., 32.16.) Base-case OCF Base-case NPV What are the OCF and NPV with fixed costs of $595,000 per year? (Do not round intermediate calculations. Round your OCF answer to the nearest whole number, e.g., 32, and round your NPV answer to 2 decimal places, e.g., 32.16.) OCF NPV What is the sensitivity of your base-case NPV to changes in fixed costs? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) For every dollar FC increases, NPV falls by
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