You are considering a new product launch. The project will cost $2,050,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales areprojected at 210 units per year; price per unit will be $18.900, variable cost per unit willbe $12,200, and fixed costs will be $600.000 per year. The required return on theproject is 12 percent, and the relevant tax rate is 24 percent.a. Based on your experience, you think the unit sales, variable cost, and fixed costprojections given here are probably accurate to within 10 percent. What are theupper and lower bounds for these projections? What is the base-case NPV? What arethe best-case and worst-case scenarios? (A negative answer should be indicated bya minus sign. Do not round intermediate calculations. Round your NPV answers to2 decimal places, e.g., 32.16. Round your other answers to the nearest wholenumber, e.g. 32.)ScenarioC.BaseBestWorstUnit Salesb. ANPV/AFCc. Cash break-evenVariable Cost210 $Fixed Costs600,000b. Evaluate the sensitivity of your base-case NPV to changes in fixed costs. (Anegative answer should be indicated by a minus sign. Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)What is the cash break-even level of output for this project (ignoring taxes)? (Do notround intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)d-1. Accounting break-evend-2. Degree of operating leverage12,200 $NPVd-1. What is the accounting break-even level of output for this project? (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)d-2. What is the degree of operating leverage at the accounting break-even point? (Donot round intermediate calculations and round your answer to 3 decimal places,e.g., 32.161.)

Net present value is difference between present value of cash inflows and the present value of cash…

You are considering a new product launch. The project will cost $2,050,000, have a four- year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 210 units per year; price per unit will be $18,900, variable cost per unit will be $12.200, and fixed costs will be $600.000 per year. The required return on the project is 12 percent, and the relevant tax rate is 24 percent.

You are considering a new product launch. The project will cost $2,050,000, have a four- year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 210 units per year; price per unit will be $18,900, variable cost per unit will be $12.200, and fixed costs will be $600.000 per year. The required return on the project is 12 percent, and the relevant tax rate is 24 percent.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...

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You are considering a new product launch. The project will cost $1,675,000, have a four- year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 195 units per year; price per unit will be $16,300, variable cost per unit will be $9,400, and fixed costs will be $550,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 21 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What is the NPV for the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your NPV answers to 2 decimal places, e.g., 32.16. Round your other answers to the nearest whole number, e.g. 32.) Scenario Unit Sales Variable Cost Fixed Costs NPV Base 195 $ 9,400 $…
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You are considering a new product launch. The project will cost $1,675,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 195 units per year; price per unit will be $16,300, variable cost per unit will be $9,400, and fixed costs will be $550,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 21 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What is the NPV for the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your NPV answers to 2 decimal places, e.g., 32.16. Round your other answers to the nearest whole number, e.g. 32.) b. Evaluate the sensitivity of your base-case…
You are considering a new product launch. The project will cost $2,350,000, have a fouryear life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 330 units per year; price per unit will be $19,600, variable cost per unit will be $14,000, and fixed costs will be $720,000 per year. The required return on the project is 10 percent, and the relevant tax rate is 21 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within +-10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your NPV answers to 2 decimal places, e.g., 32.16. Round your other answers to the nearest whole number, e.g. 32.) \table[[Scenario,Unit Sales,Variable Cost,Fixed…
You are considering a new product launch. The project will cost $750,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 440 units per year; price per unit will be $17,700, variable cost per unit will be $14,400, and fixed costs will be $725,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 23 percent. a. The unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections?
You are considering a new product launch. The project will cost $1.675 million, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 195 units per year; price per unit will be $16,300; variable cost per unit will be $9,400; and fixed costs will be $550,000 per year. The required return on the project is 12 percent and the relevant tax rate is 21 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your NPV answers to 2 decimal places, e.g., 32.16.) Scenario Upper bound Lower bound Unit sales 214 175 units Variable cost per unit $ 10,340 $ 8,480 Fixed costs $ 605,000 $ 495,000 Scenario…