a) A financial analyst for a manufacturer of BMV spare part is considering using its new engine. The production of the engine can be used over the 4 years, with zero salvage value at the end of year 4. The project's initial investment is RM60,000 which depreciates under straight-line method and its discount rate is 10 percent. The firm's corporate tax rate is 40 percent. Items Expected 500 Pessimistic 200 65 60 3000 Optimistic 800 Unit sales (unit) Price/unit (RM) Variable cost/unit (RM) Fixed costs/annum (RM) 75 100 50 2000 30 1000 Given the above information on the results of launching the new engine, you are required to compute:
a) A financial analyst for a manufacturer of BMV spare part is considering using its new engine. The production of the engine can be used over the 4 years, with zero salvage value at the end of year 4. The project's initial investment is RM60,000 which depreciates under straight-line method and its discount rate is 10 percent. The firm's corporate tax rate is 40 percent. Items Expected 500 Pessimistic 200 65 60 3000 Optimistic 800 Unit sales (unit) Price/unit (RM) Variable cost/unit (RM) Fixed costs/annum (RM) 75 100 50 2000 30 1000 Given the above information on the results of launching the new engine, you are required to compute:
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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Transcribed Image Text:QUESTION 2
a) A financial analyst for a manufacturer of BMV spare part is considering using its new
engine. The production of the engine can be used over the 4 years, with zero salvage
value at the end of year 4. The project's initial investment is RM60,000 which
depreciates under straight-line method and its discount rate is 10 percent. The firm's
corporate tax rate is 40 percent.
Items
Expected
Optimistic
800
100
30
1000
Pessimistic
Unit sales (unit)
Price/unit (RM)
Variable cost/unit (RM)
Fixed costs/annum (RM)
500
200
75
65
50
60
2000
3000
Given the above information on the results of launching the new engine, you are required
to compute:
ii) The best case NPV for the project.
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