Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Question - Practical Exercise on Scenario and Sensitivity analysis - Good Hope Ltd is considering introducing a new product with the following possible outcomes:
Worst case
Base case
Best case
Selling price per unit
20
25
30
Sales volume (units)
4,000,000
6,000,000
8,000,000
Variable cost per unit
15
13
11
Fixed operating cost per year
3,500,000
3,200,000
3,000,000
Economic life
3
4
5
The cost of plant and equipment required is expected to be N$800 000 and residual value of the plant at the end its economic life is expected to be zero, whether economic life is 3, 4 or 5 years. Assume that taxation is not applicable and the company's WACC is 11%. The fixed operating costs do not include depreciation and relate only to cash fixed overheads.
Required -
a) Determine the NPV of the project for each of the three scenarios.
b) What is the expected NPV of the project if the probability of the worst case scenario is 20%, base case is 60% and the best case is 20%?
c) What would happen to the risk of the project if each scenario had equal probability of occurrence?
d) Undertake sensitivity analysis on the selling price, sales volume and variable cost per unit.
e) How does sensitivity analysis differ to scenario analysis?
Assume the Blink Company began operations on July 1, 2013. The sole stockholder invested $25,000 in cash and $5,000 of inventory in exchange for common stock. Jul. 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1/15, n/30..
Should federal spending be drastically reduced? Yes or no? Post a substantive response to the question
The most recent financial statements for Hornick, Inc., are shown here (assuming no income taxes): Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $10,788. What is the ..
Which of the following statements regarding relevant accounting principles is correct in regards to this situation? Select all that apply.
2000 is deposited into a newly opened fund on January 1, 1999.- Calculate the balance of the fund on July 1, 1999, immediately before the deposit is made
On February 11, 20Y9, Quick Fix Company purchased $2,250 of supplies on account. Prepare a four-column account for Supplies
Determine the amount of Sunland Company inventory, the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis.
John purchased 100 shares of Black Forest Inc. stock at a price of $154.90 three months. What is John annualized holding period return (annual percentage rate)?
The cumulative effect on prior years' incomes of a change in accounting principle is reporting on the statement of retained earnings. True or False
Hornet agrees to pay 10% interest. The following are factors from a present value table: What is the amount of cash that Hornet receives today?
Bellfont expects to produce 100,000 door stoppers. Assuming no structural changes, What is Bellfont's production cost per door stopper for September?
Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%, unit variable cost is increased by 10%, and total fixed costs are increased by $135,000.
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd