Reference no: EM132410905
Creative Inc. is considering a launch of a new model of its self-driving car. The project will cost $1,000,000 for capital spending, have a four-year life, and will have zero market value at the end of its life; depreciation is straight-line to zero. Sales are projected at 250 units per year; price per unit will be $16,000, variable cost per unit will be $10,000, and fixed costs will be $450,000 per year. The required return on the project is 10% and the tax rate is 20%.
a. Creative Inc. believes sales price, unit sales, variable cost, and fixed cost projections are accurate to within ±20 percent. What are the base-case, worst-case, and best-case scenarios NPV?
b. What is the sensitivity of NPV to changes in unit sales?
c. What are the accounting break-even quantity, cash break-even quantity, and financial break-even quantity (ignoring taxes)?
|
Generate revenue for fbs level schools
: What proposals would you share with the committee?
|
|
Business application of purchasing power parity
: Flame Fixtures, Inc. is a small U.S. business in Arizona that produces and sells lamp ?xtures. Its costs and revenues have been very stable over time.
|
|
Repurchase outstanding shares and cost of equity
: What will the value be if it borrows $100,000 and repurchase the outstanding shares and the cost of equity, WACC after recapitalization?
|
|
What is the company wacc
: The first bond has a YTM of 7.8%, the second bond has a YTM of 7.1%. The tax rate is 35%. What is the company's WACC?
|
|
What is the sensitivity of npv to changes in unit sales
: Creative Inc. believes sales price, unit sales, variable cost, and fixed cost projections are accurate to within ±20 percent. What are the base-case, worst-case
|
|
What is the equivalent annual cost of light bulb
: LED bulbs have become more popular in recent years, but do they make financial sense? Suppose a typical 15-watt fluorescent light bulb costs $20
|
|
Should the company undertake the project
: The press also requires an initial investment in inventory of $30,000, and the level of inventory increases by $2,000 every year.
|
|
What is the marginal rate of tax on remitted profits
: If the U.S. parent has surplus foreign tax credits, what is the marginal rate of tax on remitted profits from the subsidiary?
|
|
Compensation in the event of expropriation
: Suppose a firm projects cash flows of $2.5 million, $3 million, and $4 million for years 1, 2, and 3, respectively, on an initial investment in Ecuador of $22
|