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Otobai is considering still another production method for its electric scooter. It would require an investment of ¥15.10 billion in addition to the initial investment of ¥15.10 billion but would reduce variable costs by ¥42,000 per unit. The cost of capital was assumed to be 11%. The total investment can be depreciated on a straight-line basis over the 10-year period, and profits are taxed at a rate of 50%. Consider the following estimates for the scooter project. Market size 1.02 million Market share .1 Unit price ¥ 385,000.0 Unit variable cost ¥ 310,000.0 Fixed cost ¥ 3.02 billion Assume investment is depreciated over 10 years straight-line and income is taxed at a rate of 50%. a. What is the NPV of this alternative scheme? (Do not round intermediate calculations. Enter your answer in billions. Round your answer to 2 decimal places.) Net present value ¥ billion b. Calculate the break-even point. (Do not round intermediate calculations. Round "PV Factor" to 6 decimal places and the final answer to the nearest whole number.) Break-even point d. Consider the following Preliminary cash-flow forecasts for Otobai's electric scooter project (figures in ¥ billions). Calculate the variable cost per year at which the electric scooter project would break even. Assume that the initial investment is ¥15.10 billion. Investment is depreciated over 10 years straight-line and income is taxed at a rate of 50%. Use Table 10.1. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Year 0 Years 1-10 1. Investment 15.1 2. Revenue 39.27 3. Variable cost 31.00 4. Fixed cost 3.02 5. Depreciation 1.51 6. Pretax profit 3.74 7. Tax 1.87 8. Net profit 1.87 Operating cash flow 3 Net cash flow -15 3 Variable cost per year ¥ e. Calculate the DOL. Consider fixed cost assuming the additional investment of ¥15.10 billion. (Do not round intermediate calculations. Round your answer to 2 decimal places.) DOL
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