Question
In: Finance
Your company wants to launch a new product. The price will be $108 and the projected...
Your company wants to launch a new product. The price will be $108 and the projected units sold will be 5,000 each of the next five years and then zero sales after that (i.e. life of five years). Variable costs per unit is $47 and fixed costs will be $36,000 per year. This project will need initial net working capital of $37,000, and NWC will then increase $7,000 per year through the end of year five. At that point 75% of NWC (no tax ramifications) will be returned to the company. Necessary equipment investment will be $900,000 and have a salvage value of 23%, net of tax. The depreciation will be straight-line over the life of this project. Your company’s current debt/equity ratio is 1.15 and this product is in line with the operations of the rest of your company. Your company is in the 21% tax bracket. Your equity investors demand a 13% return and your company’s bonds yield 5.3%. Even though no debt will be used, you still need to use your company’s WACC. Price is accurate within 5%, units sold within 3%, and variable & fixed costs within 2%. What is the NPV in the worst-case scenario?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Your company wants to launch a new product. The price will be $108 and the projected...
Your company wants to launch a new product. The price will be
$108 and the projected units sold will be 5,000 each of the next
five years and then zero sales after that (i.e. life of five
years). Variable costs per unit is $47 and fixed costs will be
$36,000 per year. This project will need initial net working
capital of $37,000, and NWC will then increase $7,000 per year
through the end of year five. At that point 75%...
Your company wants to launch a new product. The price will be $108 and the projected...
Your company wants to launch a new product. The price will be
$108 and the projected units sold will be 5,000 each of the next
five years and then zero sales after that (i.e. life of five
years). Variable costs per unit is $47 and fixed costs will be
$36,000 per year. This project will need initial net working
capital of $37,000, and NWC will then increase $7,000 per year
through the end of year five. At that point 75%...
Your company wants to launch a new product. The price will be $108 and the projected...
Your company wants to launch a new product. The price will be
$108 and the projected units sold will be 5,000 each of the next
five years and then zero sales after that (i.e. life of five
years). Variable costs per unit is $47 and fixed costs will be
$36,000 per year. This project will need initial net working
capital of $37,000, and NWC will then increase $7,000 per year
through the end of year five. At that point 75%...
1. Your company wants to launch a new product. The price will be $108 and the...
1. Your company wants to launch a new product. The price will be
$108 and the projected units sold will be 5,000 each of the next
five years and then zero sales after that (i.e. life of five
years). Variable costs per unit is $47 and fixed costs will be
$36,000 per year. This project will need initial net working
capital of $37,000, and NWC will then increase $7,000 per year
through the end of year five. At that point...
3 Your Company is planning to launch a new product in the FMCG category. What would...
3 Your Company is planning to launch a new product in the FMCG
category. What would be the product development process
and how will you choose a Differentiation and Positioning
Strategy
Blue Shade wants to launch a new product called Shady Blue in the market. The sales...
Blue Shade wants to launch a new product called Shady Blue in
the market. The sales manager needs to present the opportunity to
management. He approaches you to assist him in calculating the
required information.
He provides you with the following information.
Purchase price of the product R125,50/unit
Packaging cost R10,00/unit
Labour needed to wrap the product before it can be delivered.
(The product must be wrapped and cannot be sold without the
wrapping) Wrap 2 products per hour....
Blue Shade wants to launch a new product called Shady Blue in the market. The sales...
Blue Shade wants to launch a new product called Shady Blue in
the market. The sales manager needs to present the opportunity to
management. He approaches you to assist him in calculating the
required information.
He provides you with the following information.
Purchase price of the product R125,50/unit
Packaging cost R10,00/unit
Labour needed to wrap the product before it can be delivered.
(The product must be wrapped and cannot be sold without the
wrapping)
Wrap 2 products per hour. The...
ABC Company is preparing to launch a new product. They are considering three different product designs...
ABC Company is preparing to launch a new product. They are
considering three different product designs and will select only
the one product that yields the highest revenue. A feasibility
study suggest that product development, regardless of which of the
three products is selected, will cost $1,250,000 initially, which
includes all design, testing, set-up and initial operating costs.
Annual operating cost, once the selected product is placed into
production, will cost $125,000 and the net revenue for the first
year...
gladstone is about to launch a new product. depedning on the success of the new product,...
gladstone is about to launch a new product. depedning on the
success of the new product, gladstone may have one of four values
next year: $155 million, $130 million, $97 million, or $82 million.
these outcomes are equally likely and the risk is diversifiable.
gladstone will not make any payouts to investors during the year.
suppose the risk-free interest rate is 5.2% and assume perfect
capital markets.
a) the intitial value of gladstones equity withut leverage is
$______ million.
b)...
If a company is experiencing cannibalization from the launch of a new product, how would that...
If a company is experiencing cannibalization from the launch of
a new product, how would that translate onto the firm's financial
statements? / How can you tell that a firm is experiencing
cannibalization, from looking at the income statemements alone?
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