Sensitivity analysis for the effects of key variables

Assignment Help Business Management
Reference no: EM132956568

We assume that the company you selected is considering a new project. The project has 8 years life. This project requires initial investment of $200 million to purchase equipment, and $10 million for shipping & installation fee. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 8.5% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 1,000,000 and the annual sales growth rate is 5%. The sales price is $120 per unit and the variable cost is $85 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 2.8%. The required net operating working capital (NOWC) is 10% of sales. We have a corporate tax rate of 21.7% and the WACC is 10.92%

Perform a sensitivity analysis for the effects of key variables (e.g., sales growth rate, cost of capital, unit costs, sales price)

 

Reference no: EM132956568

Questions Cloud

What is the conditional marginal probability : 1) Suppose that the market expects that there is a 20% chance a borrower will default and the recovery is expected to be 43%. Assume the premium for the CDS on
Find cost of goods available for sale for tamarisk inc : TOTAL units and amount = cots of good available for sale 146400 Average cost = 9.15. Determine the cost of goods available for sale.
Perform a sensitivity analysis for effects of key variable : We assume that the company you selected is considering a new project. The project has 8 years life. This project requires initial investment of $200 million to
What is the rationale behind the choice of an exchange rate : What is the rationale behind the choice of an exchange rate as entity's functional currency? How are statement of profit or loss and other comprehensive income.
Sensitivity analysis for the effects of key variables : We assume that the company you selected is considering a new project. The project has 8 years life. This project requires initial investment of $200 million to
Evaluate the financing decisions of afterpay limited : Critically Evaluate the Financing Decisions of Afterpay Limited (APT) since listed on the ASX in 2016
How to calculate discount cash flow in excel : How to calculate discount cash flow in excel?
Simplify the equation of the dividend discount model : To simplify the equation of the dividend discount model we make some assumptions about future dividends. Outline two different assumptions which are often used
Analyzing the discipline policy : Analyzing the discipline policy, Identify pros and cons of the policy, and suggest how to change it, given the company and environmental factors.

Reviews

Write a Review

Business Management Questions & Answers

  Assignment change management plan

Using the organization where you work, one where you have worked, or one in which you are very familiar, identify a Human Resource Management program, policy, procedure, or initiative that you believe needs to be changed.

  Sacrificing contribution margin

Bead's product manager continues to perform well in the market. However, a competing product is coming on strong and is looking to take over as the market share leader in the segment. Without sacrificing contribution margin, what can the Bead prod..

  The federal law against child pornography

Which policy do you think is more important, the federal law against child pornography or the rules of attorney-client privilege? Is there any way for a judge to balance these two competing public policies?

  Why bond prices are subject to changes in interest rates

Please explain why bond prices are subject to changes in interest rates. Describe characteristics of bond and provide an example of firm or government entity

  Underwent a hysterectomy by gynecologist

A woman with pelvic pain eventually underwent a hysterectomy by her gynecologist, which was successful and relieved the woman's pain.

  Characteristics of monopoly

Do each of characteristics of monopoly shown on Slide #18 in the Attend section apply to the firm you have chosen in question #2? Explain why or why not each characteristic would or would not apply to your firm.

  Define devaluation and use the dd-aa model

What are the possible reasons for governments choosing to devalue their currency?

  Personal and professional goals

What are some of the ways you can use technology to help you reach your personal and professional goals?

  Calculate the standard error of the mean

Assume the population standard deviation is 1.21 hours. Calculate the standard error of the mean (Keep two decimal places).

  Contractual provisions unfair or deceptive

Are your clearly stated contractual provisions unfair or deceptive? Should you cooperate with this investigator or seek a court order enjoining investigation

  What is strategic monitoring

Describe the different events that might be identified through the creation of a strategic monitoring plan

  Good management practicesshow from your experience some of

good management practicesshow from your experience some of the most important components of good project management

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!

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