Whimsical Corporation is an international manufacturer of fragrances for women. Management at Whi... Description Whimsical Corporation is an international manufacturer of fragrances for women. Management at Whimsical is considering expanding the product line to? men's fragrances. From the best estimates of the marketing and production? managers, annual sales? (all for? cash) for this new line are 1,500,000units at $60per? unit; cash variable cost is $20per? unit; and cash fixed costs are $18,000,000 per year. The investment project requires $30,000,000of cash outflow and has a project life of 9years. At the end of the 9?-yearuseful? life, there will be no terminal disposal value. Assume all cash flows occur at? year-end except for initial investment amounts.? Men's fragrance is a new market for Whimsical?, and management is concerned about the reliability of the estimates. The controller has proposed applying sensitivity analysis to selected factors. Ignore income taxes in your computations.WhimsicalWhimsical?'s required rate of return on this project is 12 %. Future and present value tables needed for this problem. 1.Calculate the net present value of this investment proposal. 2. Calculate the effect on the net present value of the following two changes in assumptions.? (Treat each item independently of the? other.) 15?% reduction in the selling price 15?% increase in the variable cost per unit b
Whimsical Corporation is an international manufacturer of fragrances for women. Management at Whi... Description Whimsical Corporation is an international manufacturer of fragrances for women. Management at Whimsical is considering expanding the product line to? men's fragrances. From the best estimates of the marketing and production? managers, annual sales? (all for? cash) for this new line are 1,500,000units at $60per? unit; cash variable cost is $20per? unit; and cash fixed costs are $18,000,000 per year. The investment project requires $30,000,000of cash outflow and has a project life of 9years. At the end of the 9?-yearuseful? life, there will be no terminal disposal value. Assume all cash flows occur at? year-end except for initial investment amounts.? Men's fragrance is a new market for Whimsical?, and management is concerned about the reliability of the estimates. The controller has proposed applying sensitivity analysis to selected factors. Ignore income taxes in your computations.WhimsicalWhimsical?'s required rate of return on this project is 12 %. Future and present value tables needed for this problem. 1.Calculate the net present value of this investment proposal. 2. Calculate the effect on the net present value of the following two changes in assumptions.? (Treat each item independently of the? other.) 15?% reduction in the selling price 15?% increase in the variable cost per unit b
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:Whimsical Corporation is an international manufacturer of fragrances for women. Management at Whi...
Description
Whimsical Corporation is an international manufacturer of fragrances for women. Management at
Whimsical is considering expanding the product line to? men's fragrances.
From the best estimates of the marketing and production? managers, annual sales? (all for? cash) for this
new line are 1,500,000units at $60per? unit; cash variable cost is $20per? unit; and cash fixed costs are
$18,000,000 per year. The investment project requires $30,000,000of cash outflow and has a project life of
9years. At the end of the 9?-yearuseful? life, there will be no terminal disposal value. Assume all cash flows
occur at? year-end except for initial investment amounts.?Men's fragrance is a new market for
Whimsical?, and management is concerned about the reliability of the estimates. The controller has
proposed applying sensitivity analysis selected factors. Ignore income taxes in your
rate of return on this project is 12 %.
computations.WhimsicalWhimsical?'srequired
Future and present value tables needed for this problem.
1.Calculate the net present value of this investment proposal.
2.
Calculate the effect on the net present value of the following two changes in assumptions.? (Treat each
"item independently of the? other.)
a. 15?% reduction in the selling price
b
15?% increase in the variable cost per unit
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