Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 42,800 units a year at a price of $70 each. If the new product is a bust, only 20,700 units can be sold at a price of $45. The variable cost of each ball is $26 and fixed costs are zero. The cost of the manufacturing equipment is $5.86 million, and the project life is estimated at 10 years. The firm will use straight-line depreciation over the 10-year life of the project. The firm's tax rate is 35% and the discount rate is 14%. a. If each outcome is equally likely, what is the expected NPV? ( Use the minus sign for negative value. Round your answer to the nearest dollar.) NPV $ Will the firm accept the project? The firm will |(Click to select) - the project. b. Suppose now that the firm can abandon the project and sell off the manufacturing equipment for $5.2 million if demand for the balls turns out to be weak. The firm will make the decision to continue or abandon after the first year of sales. Does the option to abandon change the firm's decision to accept the project? NPV $

Hyperion, Inc. currently sells its latest​ high-speed colour​ printer, the Hyper​ 500, for $371. It plans to lower the price to $318 next year. Its cost of goods sold for the Hyper 500 is $212 per​ unit, and this​ year's sales are expected to be 21,000 units.   a. Suppose​ that, if Hyperion drops the price to $318 ​immediately, it can increase this​ year's sales by 27% to 26,670 units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?   b. Suppose​ that, for each printer​ sold, Hyperion expects additional sales of $78 per year on ink cartridges for the three​ years, and Hyperion has a gross profit margin of 61% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this​ year?

quick computing currently sells 7 million computer chips each year at a price of $12 per chip. It is about to introduce a new chip, and it forecasts annual sales of 22 million of these improved chips at a price of $15 each.  However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 1 million per year.  The old chips cost $6 each to manufacture, and the new ones will cost $10 each.  What is the proper cash flow to use to evaluate the present value of the introduction of the new chip?

Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 26,000; the price is $21,000 per car. Variable costs of production are $11,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford's sales of regular sedans b 9,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $49,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? Incremental annual cash flow from operations eTextbook and Media $

Madetaylor Inc. manufactures financial calculators.  The company is deciding whether to introduce a new calculator.  This calculator will sell for $130.  The company feels that sales will be 18,000, 22,000, 24,000, 22,000, and 18,000 units annually for the next five years.  Variable costs will be 21% of sales, and fixed costs are $500,000 annually.  The firm hired a marketing team to analyze the product's viability, and the marketing analysis cost $1,250,000.  The company plans to manufacture and store the calculators in a vacant warehouse.  Based on a recent appraisal, the warehouse and the property are worth $2.5 million after tax.  If the company does not sell the property today, it will sell it five years from today at the currently appraised value.  This project will require an injection of net working capital at the onset of the project, $250,000.  The firm recovers the net working capital at the end of the project.  The firm must purchase equipment for $5,000,000 to produce the…

A bicycle manufacturer currently produces 391,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.60 per chain. The necessary machinery would cost $292,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $43,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $21,900. If the company pays tax at a rate of 20% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the…

Raghubhai

Madetaylor Inc. manufactures financial calculators.  The company is deciding whether to introduce a new calculator.  This calculator will sell for $130.  The company feels that sales will be 18,000, 22,000, 24,000, 22,000, and 18,000 units annually for the next five years.  Variable costs will be 21% of sales, and fixed costs are $500,000 annually.  The firm hired a marketing team to analyze the product's viability, and the marketing analysis cost $1,250,000.  The company plans to manufacture and store the calculators in a vacant warehouse.  Based on a recent appraisal, the warehouse and the property are worth $2.5 million after tax.  If the company does not sell the property today, it will sell it five years from today at the currently appraised value.  This project will require an injection of net working capital at the onset of the project, $250,000.  The firm recovers the net working capital at the end of the project.  The firm must purchase equipment for $5,000,000 to produce the…

Madetaylor Inc. manufactures financial calculators.  The company is deciding whether to introduce a new calculator.  This calculator will sell for $130.  The company feels that sales will be 18,000, 22,000, 24,000, 22,000, and 18,000 units annually for the next five years.  Variable costs will be 21% of sales, and fixed costs are $500,000 annually.  The firm hired a marketing team to analyze the product's viability, and the marketing analysis cost $1,250,000.  The company plans to manufacture and store the calculators in a vacant warehouse.  Based on a recent appraisal, the warehouse and the property are worth $2.5 million after tax.  If the company does not sell the property today, it will sell it five years from today at the currently appraised value.  This project will require an injection of net working capital at the onset of the project, $250,000.  The firm recovers the net working capital at the end of the project.  The firm must purchase equipment for $5,000,000 to produce the…

What's the breakeven point in sales units? What's the breakeven point in sales dollars? Cryptocoins is a manufacturer of 3D cameras and is preparing production and sales forecasts for the coming fiscal year. The company needs to determine the point at which the projected sales revenue will equal the total of all fixed and variable costs. Fixed costs are estimated to be $314,390, and variable costs are expected to be maintained at $150 per camera. Each camera will sell for $299.