How do you do this question? ---### Financial Analysis for Family Security's GPS Tracker Project#### Scenario Analysis**Related to Checkpoint 13.3 (Scenario Analysis):**Family Security is exploring the introduction of a new product: tiny GPS trackers that can be implanted in the soles of children's shoes to facilitate tracking in case of loss or abduction. The estimations presented consider potential deviations of 11 percent (either above or below the baseline).Given the novelty of this product line and with no concrete assurance of estimate accuracy, it's essential to assess the impact of a ±11 percent variation in the key financial estimates.**Key Considerations:**1. **Initial Outlay:** $1.19 million, with no additional working capital required.2. **Lifespan and Depreciation:** The project has a 10-year duration with straight-line depreciation down to zero.3. **Firm's Financial Metrics:** - Required Rate of Return (or Cost of Capital): 9.7% - Marginal Tax Rate: 34%**Goal:** - **Calculate the Project’s NPV under different scenarios:** - **Best-case scenario:** Assumes all estimates are 11 percent higher than expected. - **Worst-case scenario:** Uses estimates that are 11 percent lower than expected.#### Data Table| **Item** | **Value** ||-----------------------|--------------------------------|| Unit Price | $125 || Variable Costs | $77 || Fixed Costs | $249,000 per year || Expected Sales | 10,500 units per year |*(Click on the icon in order to copy its contents into a spreadsheet.)*#### Analysis Instructions:**Best-case Scenario NPV Calculation:**- Increase unit price by 11% - Decrease variable costs by 11%- Decrease fixed costs by 11%- Increase expected sales by 11%**Note:** Round all the calculated NPV values to the nearest dollar for reporting accuracy.**For educational purposes, please calculate the project’s NPV under the outlined best-case scenario and worst-case scenario, applying the adjusted values to the provided financial metrics.** ---This write-up includes a detailed explanation and instruction on how to interpret and use the given financial data, suitable for an educational website focusing on business or financial analysis.

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

(Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by 11 percent (either above or below), associated with this new product are shown here: . Since this is a new product line, you are not confident in your estimates and would like to know how well you will fare if your estimates on the items listed above are 11 percent higher or 11 percent lower than expected. Assume that this new product line will require an initial outlay of $1.19 million, with no working capital investment, and will last for 10 years, being depreciated down to zero using straight-line depreciation. In addition, the firm's required rate of return or cost of capital is 9.7 percent, and the firm's marginal tax rate is 34 percent. Calculate the project's NPV under the "best-case scenario" (that is, use the high estimates-unit price 11 percent above expected, variable costs 11 percent less than expected, fixed costs 11 percent less than expected, and expected sales 11 percent more than expected). Calculate the project's NPV under the "worst-case scenario." The NPV for the best-case scenario will be $ (Round to the nearest dollar.) Data Table Unit price: $125 Variable costs: $77 Fixed costs: $249,000 per year Expected sales: 10,500 per year (Click on the icon in order to copy its contents into a spreadsheet.)

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 12P