(Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk analysis) Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and thendownload it into a personal computer. These scanners are expected to sell for an average price of $95 each, and the company analysts performing the analysis expect that the firm can sell 103,000units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be $21 perunit and fixed costs, not including depreciation, are forecast to be $1,020,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $9.7 millionthat has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $309,000 in working capital to support the newbusiness. Other pertinent information concerning the business venture is provided here:a. Calculate the project's NPV.b. Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the number of units sold.c. Determine the sensitivity of the project's NPV to a(n) 9 percent decrease in the price per unit.d. Determine the sensitivity of the project's NPV to a(n) 9 percent increase in the variable cost per unit.e. Determine the sensitivity of the project's NPV to a(n) 9 percent increase in the annual fixed operating costs.f. Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst-a. The NPV for the base-case wiData tableInitial cost of the machineExpected lifeSalvage value of the machineWorking capital requirement$9,700,0005 years$0$309,000straight line$1,940,000 per year$1,020,000 per yearDepreciation methodDepreciation expenseCash fixed costs-excluding depreciationVariable costs per unit$2110.8%Required rate of return or cost of capitalTax rate34%(Click on the icon in order to copy its contents into a spreadsheet.)X

Name: (Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk
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Description: (Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk analysis) Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and thendownload it into a personal computer. These scanners are expect

Initial Cost $9,700,000Working Capital $309,000Total Outflow as on Day 1$10,009,000

Answered: project's NPV.

Business

Finance

project's NPV.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter14: Real Options

Section: Chapter Questions

Problem 4MC

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