Assume that are the financial manager of a company, which is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 350 000 unit per year at this price for a period of 4 years. Launching this project will require purchase of a $2 000 000 equipment that has residual value in four years of $200 000 and adding $ 600 000 in working capital which is expected to be fully retrieved at the end of the project. Other information is available below:
Depreciation method: straight line
Variable cost per unit: $11
Cash fixed costs per year $350 000
Discount rate: 10%
Tax Rate: 30%
Do an analysis with cash flows of the project to determine the sensitivity of the project NPV with the following changes in the value drivers:
Unit sales decrease by 10%
Price per unit decreases by 10%
Variable cost per unit increases 10%
Cash fixed cost per year increases by 10%
Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).
After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.
If your question is slightly different from the above question, please contact us at firstname.lastname@example.org with your version of question.