You are given the following forecasted data about a project: Project life = 3 years Required investment = $1,200,000 Salvage value = $200,000 Depreciation method = straight-line depreciation • Unit price = $140 • First year's demand = 100,000 units • Annual demand growth rate 5% • Unit variable cost = $80 • Annual fixed cost = $10,000 • Income tax rate - 40% • MARR = 10% %3D %3D Suppose the key variable is identified here to be the unit variable cost. This variable's most likely value is $80 (as indicated above), but what would happen to the NPW if it were $90 instead? The change in the NPW values (new NPW - original NPW) is closest to: -$1,563,110.44 $1,563,110.44 -$1,875,732.53 $1,875,732.53
You are given the following forecasted data about a project: Project life = 3 years Required investment = $1,200,000 Salvage value = $200,000 Depreciation method = straight-line depreciation • Unit price = $140 • First year's demand = 100,000 units • Annual demand growth rate 5% • Unit variable cost = $80 • Annual fixed cost = $10,000 • Income tax rate - 40% • MARR = 10% %3D %3D Suppose the key variable is identified here to be the unit variable cost. This variable's most likely value is $80 (as indicated above), but what would happen to the NPW if it were $90 instead? The change in the NPW values (new NPW - original NPW) is closest to: -$1,563,110.44 $1,563,110.44 -$1,875,732.53 $1,875,732.53
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:You are given the following forecasted data about a project:
• Project life = 3 years
• Required investment $1,200,000
• Salvage value = $200,000
Depreciation method = straight-line depreciation
• Unit price = $140
• First year's demand = 100,000 units
Annual demand growth rate 5%
Unit variable cost $80
Annual fixed cost = $10,000
• Income tax rate = 40%
• MARR = 10%
Suppose the key variable is identified here to be the unit variable cost. This variable's most likely value is $80
(as indicated above), but what would happen to the NPW if it were $90 instead? The change in the NPW values
(new NPW - original NPW) is closest to:
-$1,563,110.44
$1,563,110.44
-$1,875,732.53
$1,875,732.53
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