Question

In: Finance

Unit price: $50 Variable cost: $30 Fixed Cost: $430,000 Expected Sales: 42,000 units per year However,...

Unit price: $50
Variable cost: $30
Fixed Cost: $430,000
Expected Sales: 42,000 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% high or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.9 million, which will be depreciate straight line over the project life to a final value of zero. The firm’s tax rate is 35% and the required rate of return is 10%.

  1. What is project NPV in the best case scenario, that is, assuming all variables take on the best possible value?
  2. What is project NPV in the worst case scenario?

Solutions

Expert Solution

jeff jeffy answered 7 months ago
Next > < Previous

Related Solutions

Unit price: $50 Variable cost: $30 Fixed Cost: $430,000 Expected Sales: 42,000 units per year However,...
Unit price: $50 Variable cost: $30 Fixed Cost: $430,000 Expected Sales: 42,000 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% high or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.9 million, which will be depreciate straight line over the project life to a final value of zero. The firm’s tax...
Given the following Selling Price: 50$ per unit Variable Cost: 40$ per unit Fixed Cost: 80,000$...
Given the following Selling Price: 50$ per unit Variable Cost: 40$ per unit Fixed Cost: 80,000$ per unit Calculate: A. Contribution margin as well as the contribution margin ratio B. Profit(loss) if 7,200 units are sold C. Margin of safety if 10,100 units are sold D. Break even point in dollars
Suppose Zume's sales price is 19, variable cost per unit is 8, and fixed cost is...
Suppose Zume's sales price is 19, variable cost per unit is 8, and fixed cost is 416. Zume sells 1500 pizzas. What is Zume’s Margin of Safety in sales dollars? (HINT: Use Contribution Margin Ratio). (Round ONLY you final answer to 2 digits...keep at least 3 digits on CM ratio during calculations )
Daily Company’s current fixed costs are $430,000 and current variable cost per unit is $70. The...
Daily Company’s current fixed costs are $430,000 and current variable cost per unit is $70. The current selling price is $92 per unit. a. What is the company's current contribution margin? Round your answer to the nearest cent (2 decimal places). b. What is the company's current contribution margin ratio? Round your answer to 2 decimal places and include a percentage (%) sign. c. What is the company's current break-even point in units? Round your answer to the nearest whole...
Price per Unit Variable Cost per Unit Units Sold per Year Basic $ 700 $ 220...
Price per Unit Variable Cost per Unit Units Sold per Year Basic $ 700 $ 220 700 Retest 1,050 580 200 Vital 4,600 3,100 100 Variable costs include the labor costs of the medical technicians at the lab. Fixed costs of $490,000 per year include building and equipment costs and the costs of administration. A basic "unit" is a routine drug test administered. A retest is given if there is concern about the results of the first test, particularly if...
Sales per period 1,000 units Selling price $40 per unit Variable manufacturing cost $12 per unit...
Sales per period 1,000 units Selling price $40 per unit Variable manufacturing cost $12 per unit Selling expenses $5,100 plus 5% of selling price Administrative expenses $3,000 plus 20% of selling price note Note that some costs have variable components such as commissions on sales and shipping costs. The contribution margin ratio would be: A) 70%. B) 45%. C) 75%. D) 55%.
If the unit sales price is $12, the unit variable cost is $7.00 and fixed costs...
If the unit sales price is $12, the unit variable cost is $7.00 and fixed costs are $125,000; what is the, break-even quantity in # of units? ___________________________________ Please Show steps
Sales (12,800 units × $30 per unit) $ 384,000 Variable expenses 192,000 Contribution margin 192,000 Fixed...
Sales (12,800 units × $30 per unit) $ 384,000 Variable expenses 192,000 Contribution margin 192,000 Fixed expenses 214,500 Net operating loss $ (22,500 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,600 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $89,000 per month. If the president is right,...
(Break-even analysis) Project Accounting ​Break-Even Point​ (in units) Price per Unit Variable Cost per Unit Fixed...
(Break-even analysis) Project Accounting ​Break-Even Point​ (in units) Price per Unit Variable Cost per Unit Fixed Costs Depreciation A 6, 230 ​$52 ​$102,000 ​$26,000 B    760 ​$1,000 ​$499,000 ​$103,000 C 1,970 ​$25 ​$13 ​$5,000 D 1,970 ​$25 ​$7 ​$17,000 a.  Calculate the missing information for each of the above projects. b.  Note that Projects C and D share the same accounting​ break-even. If sales are above the​ break-even point, which project would you​ prefer? Explain why. c.  Calculate the cash​...
BWP projects sales of 100000 units next year at an average price of $50 per unit....
BWP projects sales of 100000 units next year at an average price of $50 per unit. Variable costs are estimated at 40% of revenue, and fixed costs will be $2.4 million. BWP has $1 million in bonds outstanding, on which it pays 7%, and its marginal tax rate is 38%. There are 100000 shares of stock outstanding which trade at their book value of $30. Compute BWP's contribution, contribution margin, net income, DOL, and EPS. Round the answers to two...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT