User Account

All Pages

Determine the sensitivity of the project npv

Assignment Help Managerial Accounting
Reference no: EM132540829

Risk Analysis and Project evaluation:

Case Study: Assume that are the financial manager of a company, which is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 350 000 unit per year at this price for a period of 4 years. Launching this project will require purchase of a $2 000 000 equipment that has residual value in four years of $200 000 and adding $ 600 000 in working capital which is expected to be fully retrieved at the end of the project.

Other information is available below:

Depreciation method: straight line

Variable cost per unit: $11

Cash fixed costs per year $350 000

Discount rate: 10%

Tax Rate: 30%

Question 1: Do analysis with cash flows of the project to determine the sensitivity of the project NPV with the following changes in the value drivers and provide your results in (a) relevant tables:

Unit sales decrease by 10%

Price per unit decreases by 10%

Variable cost per unit increases 10%

Cash fixed cost per year increases by 10%

Reference no: EM132540829

Questions Cloud

What are the individual adr for both single and double rooms : Based on the information given, what are the individual ADRs for both single and double rooms for Folt & Golt (assume that there are 365 days in a year)?
Describe the occupational safety for a health institution : Write a two-page essay based on the Pan American Health Organization document explaining the following: occupational safety for a health institution.
What equivalent occupancy percentages must be achieved : What equivalent occupancy percentages must be achieved to maintain the same levels of contribution margin for both $10.00 and 10.00% discounts
Find the overall break even point for the company : Determine the overall break even point for the company. Show work. what will happen to the break even point for the company? Explain
Determine the sensitivity of the project npv : Do analysis with cash flows of the project to determine the sensitivity of the project NPV with the following changes in the value drivers
How many tubs should ppc produce : PPC bath products LTD. Assume that PPC can sell as many 1000 sinks and 500 tubs per year. How many tubs should PPC produce?
What are non-pharmacological approaches to onychomycosis : According to the recommended guidelines, what are the non-pharmacological approaches to Onychomycosis? Provide patient education. Keep in mind the past medical.
What sales dollar level required to break even at old price : Variable expenses are 60% of sales and fixed expenses $30,000. What is the sales dollar level required to break even at the old price of $7.50?
What was the amount of cost of goods manufactured last month : Assume that there were no beginning or ending work in process balances. What was the amount of cost of goods manufactured last month?

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Solve direct materials cost variance and direct materials

Solve the direct materials cost variance and the direct materials efficiency variance. Manna, Inc. is a manufacturer of lead crystal glasses.

  Should the company accept or reject the order

Consider the new information on activity costs associated with the layoff. Should the company accept or reject the order? Provide supporting computations.

  Calculate the amount of fixed manufacturing overhead

Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing and reconcile it to the difference between income computed under variable and full costing.

  What was the standard direct labor cost for actual output

$1800 and a favorable direct labor effienceny varience of $2900 what was the standard direct labor cost for actual output during the period?

  Calculate financial leverage measures

Calculate financial leverage measures. The following information was available for the year ended December 31, 2013:Earnings before interest and

  Determine the accounting rate of return of the new business

The equipment will be depreciated over a five-year period using straight-line depreciation with no residual value. Determine the accounting rate of return of the new business.

  Find how many units did produce

Net income under variable costing was $11700 and $15700 under absorption costing last year. EKP sold 22500 units. How many units did it produce?

  What average cost of each unit remaining in ending wip

What is the average cost of each unit remaining in ending WIP? What is the cost of each unit completed and transferred out? What are the total equivalent units

  Gazelle corporation, a merchandiser, recently completed

1.Gazelle Corporation, a merchandiser, recently completed its calendar- year 2013 operations. For the year,

  How would advice janet bakery

Ames Company is thinking of dropping product line C because it is reporting a loss. How would you advise Ames Corp and why?

  Examine the start-up cost for each business

Examine The start-up cost for each business, Fixed and variable cost for each business, What are their differences and similarities in their cost structure

  Determine the break-even point in sales units

Determine the break-even point in sales units if the selling price was increased to $66 per unit. Round answer to the nearest whole number

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd