Evaluate sensitivity of your base-case NPV to changes

Assignment Help Financial Management

Reference no: EM133674506

Question

You are considering a new product launch. The project will cost $1.675 million, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 195 units per year; price per unit will be $16,300; variable cost per unit will be $9,400; and fixed costs will be $550,000 per year. The required return on the project is 12 percent and the relevant tax rate is 21 percent.

Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios?

- Evaluate the sensitivity of your base-case NPV to changes in fixed costs.

- What is the accounting break-even level of output for this project?

Reference no: EM133674506

Questions Cloud

Compensating balance versus discount loan automotive : Compensating balance versus discount loan Automotive Accessories needs to bor- row $135,000 for 6 months for renovations.

How do you think the two companies viewed strategic risk : We learned of multiple perspectives on meaning and application of strategic risk. How do you think these two companies viewed strategic risk, before the fire?

Compared with alternative investment : Discuss the difference to the investor between the $99M security issued by the SPE, compared with an alternative investment

How does this research fit into the big picture : Analyze article, examining strength of its thesis, method of investigation, analysis of data, and conclusions. How does this research fit into the big picture?

Evaluate sensitivity of your base-case NPV to changes : Evaluate the sensitivity of your base-case NPV to changes in fixed costs. What is the accounting break-even level of output for this project?

Difference between two investment alternatives to investor : As an investor in the $99M security issued by the SPE, Discuss the difference between the two investment alternatives to the investor.

How can being mindful of privilege level impact marginalized : As a human service practitioner how can being mindful of power and privilege level impact the marginalized?

Capital gains yield for the discount bond : What are the total return, the current yield, and the capital gains yield for the discount bond?

Role of a cognitive-behavioural therapy intervention : Pregnancy stressors and postpartum symptoms of depression and anxiety: the moderating role of a cognitive-behavioural therapy (CBT) intervention.

User Account

All Pages