Assume that the company, where you are working as a team in Financial Department, 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 650 000 unit per year at this price for a period of 4 years. Launching this project will require purchase of a $3 500 000 equipment that has residual value in four years of $500 000 and adding $ 850 000 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: $17

Cash fixed costs per year: $450 000

Discount rate: 10%

Tax Rate: 30%

 

Required:

Calculation NPV:

  1. Original Case: As per details give above.
  2. Worst case: Unit sales decrease by 20%; price per unit decreases by 20%; variable cost per unit increases by 20 %; cash fixed cost per year increases by $100 000
  3. Best case: Unit sales increase by 20%; price per unit increases by 20%; variable cost per unit decreases by 20%; cash fixed cost per year decreases by $100 000

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 info@myassignmentguru.com with your version of question.