FUNDAMENTALS OF CORPORATE FINANCE
10th Edition
ISBN: 9781260013962
Author: BREALEY
Publisher: RENT MCG
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Chapter 10, Problem 10QP
Summary Introduction
To find: The variable cost per unit.
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Students have asked these similar questions
The following estimates have been prepared for a project:
Fixed costs: $5,400
Depreciation: $3,600
Sales price per unit: $3
Accounting break-even: 50,000 units
What must be the variable costper unit?
The following estimates have been prepared for a project:
Fixed costs: $36,000Depreciation: $24,000Sales price per unit: $4Accounting break-even: 40,000 units
What must be the variable cost per unit? (Round your answer to 2 decimal places.)
The most likely outcomes for a particular project are estimated as follows:
Unit price:
Variable cost:
Fixed cost:
Expected sales:
50
24
30
$370,000
36,000 units per year
However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10%
higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.4 million, which will
be depreclated straight-line over the project life to a final value of zero. The firm's tax rate is 21% and the required rate of return is 14%.
(For all the requirements, a negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do
not round intermediate calculations. Round your answer to the nearest dollar amount.)
a. What is project NPV in the best-case scenario, that is, assuming all variables take on the best possible value?
b. What is project NPV in the worst-case scenario?
Chapter 10 Solutions
FUNDAMENTALS OF CORPORATE FINANCE
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