Calculate the base-case cash flow and npv

Assignment Help Business Economics
Reference no: EM131857961

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: EM131857961

Questions Cloud

Develop recruitment methods for the job opportunity : Develop a step procedure for the HR Department to use in order to maintain all applicants' records in case a discriminatory charge occurs
Determining the average return : There's a 30.0% chance of that happening. Otherwise, the stock price won't change. What's the average return?
Macrs property for tax purposes : A proposed cost-saving device has an installed cost of $535,000. The device will be used in a five-year project
What were some of your reactions to the video : Begin by watching the TED Talk by Georgette Mulheir: The Tragedy of Orphanages - What were some of your reactions to the video
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?
What are your current beliefs about sex and sexuality : What are your current beliefs about sex and sexuality? Does any of the material covered up until this point conflict with your beliefs?
What are the main assumptions behind abductive reasoning : A good hypothesis starts with a clear research question. What is the role of abduction in arriving at clear research questions
What is the irr for this project : If the tax rate is 35 percent, what is the IRR for this project?
Annual change in the average selling price : What was the annual change in the average selling price? How can this problem be worked out in an excel sheet?

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

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