1. For a new product, sales volume in the first year is estimated to be 75,000 units and isprojected to grow at a rate of 6.6% per year. The selling price is $100 and will increase by $10each year. Per-unit variable costs are $20 and annual fixed costs are $1,000,000. Per-unit costsare expected to increase 4.25% per year. Fixed costs are expected to increase 10% per year.Develop a spreadsheet model to predict the net present value of profit over a three-year period,assuming a 4% discount rate.Note: Please include the Excel worksheet with all the details with your answer.

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: 1. For a new product, sales volume in…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 23% over the current amount of 105,000 units. If your sales price is $21 per unit, what are the incremental revenues next year from the upgrade? The incremental revenues are $ (Round to the nearest dollar.)
Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 40,000 units at $21 a unit, production costs at 38% of sales price, annual fixed costs for production at $160,000, and straight-line depreciation expense of $210,000 per year. The company tax rate is 30%. What is the annual operating cash flow of the new GPS system?
Please make in excel and take screenshots. A Pumpkin Pie Manufacturing Company pays on the tenth day after purchase. The average collection period is 35 days, and the average inventory age is based on inventory turnover of 9 times per year. The company spends about $16 million on operating cycle investments, and is considering a plan that would lengthen its average payable period by 20 days. If the company pays 12% per year on its investment of resources, what annual savings-if any-can it realize with this plan? Assume there is no discount for early payment of accounts payable and a year has 360 days.
A machine having a first cost of $20,000 is expected to save $1500 in the first year of operation, and the savings should increase by $200 every year until (and including) the 9th year; thereafter, the savings will decrease by $150 until (and including) the 16th year. Using equivalent uniform annual worth, is this machine economical? Assume a MARR of 10%.
A 100-room hotel has an ADR of $100, annual fixed cost of $1,000,000, variable cost per room sold of $10 and average occupancy of 70%. Find the required occupancy if initial equity investment in the hotel was $2,000,000 and owners require an annual rate of return of 15% and tax rate is equal to 35%. Assume 30 days in a month and 360 days in a year.
Revenues generated by a new fad product are forecast as follows: Year Revenues $45,000 1 2 35,000 3 25,000 4 20,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.
Equipment maintenance costs for manufacturing explosion-proof pressure switches are projected to be $125,000 in year 1 and increase by 3% each year through year 5. What is the equivalent annual worth of the maintenance costs at an interest rate of 10% per year, compounded semiannually? Solve using (a) the factor formula and (b) a spreadsheet.
Please make in excel and take screenshots. A Pumpkin Pie Manufacturing Company pays on the tenth day after purchase. The average collection period is 35 days, and the average inventory age is based on inventory turnover of 9 times per year. The company spends about $16 million on operating cycle investments, and is considering a plan that would lengthen its average payable period by 20 days. If the company pays 12% per year on its investment of resources, what annual savings-if any-can it realize with this plan? Assume there is no discount for early payment of accounts payable and a year has 360 days. exercise in the image, it is in Spanish, but it is the original one. exercise in the image, it is in Spanish, but it is the original one I already translated it for you, the other image is the format... I can't translate the format, but it's easy to deduce.
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 8 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) Investment in working capital of 0.20 x 22,000 × $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional Investment of $200,000. This Investment will be depreciated straight-line over 3 years. The firm's tax rate is 30%. The discount rate is 20%. a. What is the net present value of the project? Note: Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV Increase if the firm takes Immediate 100% bonus depreciation? a. Net present value b. Increase in NPV
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The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year Unit Sales 1 22,000 2 30,000 3 14,000 4 5,000 Thereafter 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) investment in working capital of 0.20 × 22,000 × $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm’s tax rate is 30%. The discount rate is 20%. Use the MACRS depreciation schedule. a. What is the net present value of the project? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
(engineering economic) a company considers purchasing a machine for $3000. The tool is planned to be used for 10 years and after that it will be sold for 25% of its purchase price. With the purchase of the tool, the company must incur operating costs of $ 400 per year. If the owner of the company wants a return of 10% annually on the investment made, what is the uniform annual income for at least 10 years that must be obtained from the heavy equipment so that the wishes of the owner of the company are fulfilled?

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