Calculate the base-case cash flow and npv

Assignment Help Finance Basics
Reference no: EM131856274

We are evaluating a project that costs $1,720,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 91,000 units per year. Price per unit is $37.95, variable cost per unit is $23.20, and fixed costs are $815,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project.

a. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? Explain what your answer tells you about a 500-unit decrease in projected sales.

b. What is the sensitivity of OCF to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in estimated variable costs

Reference no: EM131856274

Questions Cloud

Conduct an audience analysis : You work for a local car dealership, and have been asked by your chamber of commerce to deliver a presentation to the community on buying a car.
What level of pretax cost savings do we require : What level of pretax cost savings do we require for this project to be profitable?
Contracted to develop-launch one of two different satellites : Calisto Launch Services is an independent space corporation and has been contracted to develop and launch one of two different satellites.
Calculate the diameter of the bubbles at the top : Calculate the diameter of the bubbles at the top of the reactor assuming that no coalescence occurs - At steady-state, the concentration of hydrogen
Calculate the base-case cash flow and npv : Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure?
Explain what that speech means to you : Provide the link to the speech you chose, so your classmates can read the speech as well.
Evaluate the influence of leadership and improvement teams : Evaluate the influence of leadership and improvement teams in sustaining improvement efforts.
What is the irr for project : Working capital will revert back to normal at the end of the project. If the tax rate is 35 percent, what is the IRR for this project?
Realized return is known as holding period yield : The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. your realized return is known as the holding period yield.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd