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You are considering a new product launch. The project will cost $2,150,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 150 units per year; price per unit will be $28,000, variable cost per unit will be $17,000, and fixed costs will be $580,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 34 percent. a. The unit sales, variable cost, and fixed cost projections given above 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? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your NPV answers to 2 decimal places, e.g., 32.16.) Scenario Upper bound Lower bound Unit sales units Variable cost per unit $ $ Fixed costs $ $ Scenario NPV Base-case $ Best-case $ Worst-case $ b. Calculate the sensitivity of your base-case NPV to changes in fixed costs. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) ΔNPV/ΔFC $ c. What is the accounting break-even level of output for this project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Accounting break-even units.
Efficient markets require which one of these? Market prices can be efficiently priced if.
Katy owns100 shares of Landshark Incorporated stock. Landshark declared $3500 in dividends this year, and Katy received $1000 of this money. How many total shares of Landshark Inc. are there? If you purchased $2320 worth of stock in the company which..
Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 monthsremaining until maturity.- What price would you expect a 6-month maturity Treasury bill to sell for?
Calculate the nominal interest rate charged for this financing arrangement. Calculate the effective interest rate.
A wealthy philanthropist has established the following endowment for a hospital. The details are as follows: a cash deposit of $ 12 M two years from now; an annual cash deposit of $4M per year for the next five years. what is the value of this endowm..
You own 500 shares of Stock A at a price of $60 per share, 405 shares of Stock B at $80 per share, and 500 shares of Stock C at $41 per share. The betas for the stocks are .8, 1.8, and .7, respectively. What is the beta of your portfolio?
Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $78,000 per month plus $0.80 per meal..
What is the present value of the following annuity?
Analyze the situation and determine if the circumstance could have been handled better.
If you are wrong about the fraud, it could cost you your job. What will you do? How would you do it? Why did you choose that path over a different path?
The 2012 balance sheet of Bianchi brickyards, which is operating at full capacity, reported current assets of $8,790, net fixed assets of $29,400, current liabilities of $3,705, long-term debt of $13,200, common stock of $15,000 and retained earnings..
Use duration to estimate the new price of the bond. Calculate the new bond price.
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