We are evaluating a project that costs $907,000, has an 14-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 94,000 units per year. Price per unit is $42, variable cost per unit is $22, and fixed costs are $916,070 per year. The tax rate is 35 percent, and we require a 10 percent return on this project. Requirement 1: Break-Even (a)Calculate the accounting break-even point. (Do not round your intermediate calculations.) (Click to select) v (b)What is the degree of operating leverage at the accounting break-even point? (Do not round your intermediate calculations.) (Click to select) ♥ Requirement 2: Base-Case & NPV Sensitivity (a)Calculate the base-case operating cash flow. (Do not round your intermediate calculations.)

We are evaluating a project that costs $907,000, has an 14-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 94,000 units per year. Price per unit is $42, variable cost per unit is $22, and fixed costs are $916,070 per year. The tax rate is 35 percent, and we require a 10 percent return on this project. Requirement 1: Break-Even (a)Calculate the accounting break-even point. (Do not round your intermediate calculations.) (Click to select) v (b)What is the degree of operating leverage at the accounting break-even point? (Do not round your intermediate calculations.) (Click to select) ♥ Requirement 2: Base-Case & NPV Sensitivity (a)Calculate the base-case operating cash flow. (Do not round your intermediate calculations.)

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 considering a new product launch. The project will cost $1,750,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 220 units per year; price per unit will be $20,000, variable cost per unit will be $13,000, and fixed costs will be $500,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 22 percent. a-1.The unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)a-2.What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,…
We are evaluating a project that costs $953,000, has a life of ten years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 134,000 units per year. Price per unit is $37, variable cost per unit is $23, and fixed costs are $957,765 per year. The tax rate is 24 percent, and we require a return of 17 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 14 percent. Calculate the best case npv and worst case npv
We are evaluating a project that costs $788,400, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $52, variable cost per unit is $36, and fixed costs are $750,000 per year. The tax rate is 21 percent, and we require a return of 12 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±15 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case Worst-case
You are considering a new product launch. The project will cost $750,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 440 units per year; price per unit will be $17,700, variable cost per unit will be $14,400, and fixed costs will be $725,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 23 percent. a. The unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections?
1We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 71,000 units per year. Price per unit is $49, variable cost per unit is $33, and fixed costs are $765,000 per year. The tax rate is 35%, and we require a 10% return on this project. urgent please answer!! will like
Suppose we think we can sell 89405 boxes per year at a price of $9 per box. It costs us about $5.6 per box. The life time of this project is three-year life. We require a 15 percent return on new products. Fixed costs will run $24226 per year. Further, we will need to invest a total of $105000 in manufacturing equipment which will be depreciated using straight line method. Furthermore, the cost of removing the equipment will roughly equal its actual value in three years, so it will be essentially worthless on a market value basis as well. Finally, the project will require an initial $10000 investment in net working capital, and the tax rate is 36 percent. - Calculate the CFFA, use Excel in your solution
We are evaluating a project that costs $976,000, has a life of ten years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 144,000 units per year. Price per unit is $36, variable cost per unit is $25, and fixed costs are $984,784 per year. The tax rate is 23 percent, and we require a return of 13 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 17 percent. a. Calculate the best-case NPV. Best case b. Calculate the worst-case NPV. Worst case
We are evaluating a project that costs $1,920,000, has a 6-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 94,500 units per year. Price per unit is $38.43, variable cost per unit is $23.60, and fixed costs are $839,000 per year. The tax rate is 23 percent and we require a return of 12 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Best-case NPV Worst-case NPV
We are evaluating a project that costs $2,130,000, has a 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,600 units per year. Price per unit is $38.85, variable cost per unit is $23.95, and fixed costs are $860,000 per year. The tax rate is 25 percent, and we require a return of 11 percent on this project. a. Calculate the base-case operating cash flow and NPV. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the sensitivity of NPV to changes in the sales figure? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. If there is a 450-unit decrease in projected sales, how much would the NPV change? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. d. What is the sensitivity…
Daily Enterprises is purchasing a $10.3 million machine. It will cost $46,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.2 million per year along with incremental costs of $1.1 million per year. Daily’s marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine? A. The free cash flow for year 0 will be? (Round to nearest dollar.) B. The free cash flow for years 1-5 will be? (Round to the nearest dollar.)
Desai Industries is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price should increase with inflation. Fixed costs will also be constant, but variable costs should rise with inflation. The project should last for 3 years. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. At the end of the project’s life, the equipment would have no salvage value. No change in net operating working capital (NOWC) would be required for the project. This is just one of many projects for the firm, so any losses on this project can be used to offset gains on other firm projects. What is the project's expected NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equpiment cost $200,000 Units sold 58,000 Average price per unit, Year 1 $25.00 Fixed op. costs (constant)…
A project costs $2.43 million and has no salvage value. Depreciation is straight-line to zero over the five-year life of the project. Sales are projected at 64,000 units per year, price per unit is $73.29, variable cost per unit is $42.93, and fixed costs are $623,000 per year. The tax rate is 35 percent, and the required rate of return is 9.6 percent. What is the sensitivity of NPV to a 100-unit increase in the sales figure?

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