Juhari Berhad plans to introduce a new innovative project at Johor Bahru. The cost of the project is RM800,000 and it will be depreciated over a five-year period on the straight-line basis to zero value. The company expects to sell 250 units per year at RM20,000 per unit. The variable cost per unit and fixed cost are RM16,000 and RM130,000 respectively. There is no salvage value at the end of the useful life. Your required rate of return on new project is 18 percent and tax rate is 35 percent. Calculate; ii) Calculate the sensitivity of the base case Net Present Value (NPV) to change in unit price to RM21,000.
Juhari Berhad plans to introduce a new innovative project at Johor Bahru. The cost of the project is RM800,000 and it will be depreciated over a five-year period on the straight-line basis to zero value. The company expects to sell 250 units per year at RM20,000 per unit. The variable cost per unit and fixed cost are RM16,000 and RM130,000 respectively. There is no salvage value at the end of the useful life. Your required rate of return on new project is 18 percent and tax rate is 35 percent. Calculate; ii) Calculate the sensitivity of the base case Net Present Value (NPV) to change in unit price to RM21,000.
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...
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