Estimates for new small engine assembly project

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Reference no: EM132361701

Assignment: Must use Excel

Complete the following problems. You must show your work on the math problems to get full credit. Every student is responsible for completing their own responses to the following problems.

1. Eastern Engineering has the following base-case estimates for a new small engine assembly project:

Capital Investment = $15,000,000

Fixed Costs = $3,250,000

Variable Costs = $600 per unit

Price per Unit = $1,000

Demand = 20,000 units per year

Service Life = 12 years

Salvage Value = $500,000

MARR = 20%

A) Find the net present worth, equivalent annual worth, and rate of return of this base-case scenario.

B) If demand for Eastern Engineering's small engines were to be 17,000 instead of 20,000, how would the net present worth, equivalent annual worth, and rate of return compare to the base-case scenario? What if the demand was 23,000?

C) If the fixed costs were to be 20% lower, how would it affect the net present worth, equivalent annual worth, and rate of return of the project? What if the fixed costs were 20% higher?

D) If the variable costs were to be 15% lower, how would it affect the net present worth, equivalent annual worth, and rate of return of the project? What if the variable costs were 15% higher?

Reference no: EM132361701

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