A proposed project has estimated sale units of 2,500, giveor take 2 percent. The expected variable cost per unit is$6.79 and the expected fixed costs are $17,500. Costestimates are considered accurate within a plus or minus 3percent range. The depreciation expense is $2,850. The saleprice is estimated at $15.40 a unit, give or take 3 percent.The company bases its sensitivity analysis on the expectedcase scenario. If a sensitivity analysis is conducted using avariable cost estimate of $7, what will be the total annualvariable costs?a. $20,750Marsich Company has the following information forSeptember:SalesVariable cost of goods soldFixed manufacturing costs$500,000$235,000$80,000Variable selling and administrative expenses $45,000Fixed selling and administrative expenses $30,000Determine the following for Marsich Company for the monthof September.1. Manufacturing margin2. Contribution margin3. Income from operationsb. $16,625c. $17,500d. $17,850e. $18,125

1) Given:Estimated sale units: 2,500(±2%)Expected variable cost per unit: $6.79Expected fixed costs:…

Answered: A proposed project has estimated sale…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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How do I determine which is the correct answer for this problem? A company estimates that an average-risk project has a WACC of 10 percent, a below-average-risk project has a WACC of 8 percent, and an above-average-risk project has a WACC of 12 percent. Which of the following independent projects should the company accept? a. Project A has average risk and an IRR = 9 percent. b. Project B has below-average risk and an IRR = 8.5 percent. c. Project C has above-average risk and an IRR = 11 percent. d. All of the projects above should be accepted. e. None of the projects above should be accepted. Please answer fast I give you upvote.
An interest rate of 15% is used to evaluate a new system that has a first cost of $212,400, annual operating and maintenance costs of $41,200, annual savings of $94,600, a life of 6 years, and a salvage value of $32,500. After initial evaluation, the firm receives word from the vendor that the first cost is 5% higher than originally quoted. The percentage error in the system’s present worth from this is closest to what value? (a) 5% (b) 15% (c) 100% (d) 300%
A project has following estimated data: Price = $60 per unit; variable cost = $30 per unit; Fixed cost = $100,000; Company has borrowings of $100,000 at a rate of 10%. Calculate the combined leverage of the project when units sold are 10,000 units. а. 1.58 b. 0.63 с. 1.50 d. 1.05
An engineer proposes to spend $95,000 on a capital project to upgrade a package delivery system. The project is expected to have labor savings of $20,000 a year plus reduce scrap costs by $5000 a year. There is expected to be no salvage value at the end of the equipment life, which is anticipated to be 7 years. MARR is 12%. This question is in five parts. The engineer next performs a sensitivity analysis for a best case and worst case scenario: Best Case Worst Case Initial Cost $95,000 $110,000 Labor Savings $25,000 $15,000 Scrap Cost Reduction $6,000 $4,00O Part 4: What is the present worth (PW) in the worst case scenario? (your answer should be a positive or negative number and do not use commas or $ signs)
The Reiph Transportation Company is planning to buy a new fleet of trucks requiring an initial investment of $1,000,000, and $2,500,000 annually to maintain and operate. The expected life of the new fleet is 10 years. The revenue is estimated to be $5,000,000 per year and the salvage value is expected to be $250,000. The MARR is 18%. Conduct a sensitivity analysis based on the given information. a. Calculate the PW of the Base case based on above given data. (Do not use AW or FW) b. Calculate the PW for the range of -10% to +15% for initial cost. (Do not use AW or FW)
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Blooper's analysts have come up with the following revised estimates for its magnoosium mine: Range Pessimistic Optimistic Initial investment +50% -25% Revenues -15% +20% Variable costs, percent of revenues +10% -10% Fixed costs +50% -30% Working capital, percent of expected value +50% -50% Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1 and accompanying data as a starting point for the analysis. Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places. Project NPV Pessimistic Expected Optimistic Initial investment Revenues Variable costs Fixed costs Working capital
You are analyzing a capital budgeting project. The project is expected to have a PV of cash inflows of $310 million and will cost $250 million (in present value dollars) to take on. You have done a simulation of the project cashflows and the simulation yields a variance in present value of cash inflows of 0.04. You have the rights to this project for the next 10 years, during which period you have to pay $11 million a year to retain the project rights. The 10-year treasury bond rate is 4.5% . a. What is the value of the project as an option? The value is $Answer 1 Question 3. (Round your answer to two decimals. Omit the '$' sign in your response.) b. What is the difference in the project's value from option pricing and traditional NPV?
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A project has an initial investment of 100. You have come up with the following estimates of the project's cash flows (there are no taxes): Revenues Costs Pessimistic 15 8 Multiple Choice -30, +20, +70. Suppose the cash flows are perpetuities and the cost of capital is 10 percent. Conduct a sensitivity analysis of the project's NPV to variations in revenues. (Answers appear in order: [Pessimistic, Most Likely, Optimistic].) -50, +50, +70. -100, -50, +80. Most Likely +5, +11, +18. 20 8 Optimistic 25 8

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