What are the best-case and worst-case scenarios

Assignment Help Financial Accounting

Reference no: EM131256767

You are considering a new product launch. The project will cost $2,300,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 160 units per year; price per unit will be $30,000, variable cost per unit will be $18,500, and fixed costs will be $610,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 36 percent.

a. The unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios?

Reference no: EM131256767

Questions Cloud

What security features will you implement : What data will you need to prepare an accounts receivable aging report. Where will you collect the data you need to prepare the report? How will you collect the necessary Data for the report? How will you distribute the report? How many copies will y..

More accurately represent the value of its assets : A company uses depreciation to more accurately represent the value of its assets. Discuss how you would determine the life of an asset and what the implications would be if the life you select is too long or too short. How would you correct this?

Determine depreciation that should be on income statement : Merton Company purchased a building on January 1, 2013, at a cost of $364,000. Merton estimated that its life would be 25 years and its residual value would be $14,000. On January 1, 2014, the company made several expenditures related to the building..

Interest charges were earned for current and preceding years : The following data were taken from recent annual reports of Caliber Company, which operates a low-fare company service to over 50 cities in the United States. Current Year Preceding Year Interest expense $42,000 $46,000 Income before income tax 247,8..

What are the best-case and worst-case scenarios : You are considering a new product launch. The project will cost $2,300,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. The unit sales, variable cost, and fixed cost projections given above are probably ac..

Aging method to adjust allowance for uncollectible accounts : Maverick Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December? 31, 2014 the balance of accounts receivable is $220,000, and the allowance for uncollectible accounts has a credit balanc..

What is the adjusting journal entry : If the company purchased $800 of supplies with cash on 1/1/2015, what is the journal entry? If someone counts the supplies still have $300 leftover on 12/31/2015, what is the adjusting journal entry?

Why is airline profitability very sensitive to these cycles : Every airline has what is called a break-even load factor. That is the percentage of the seats the airline has in service that it must sell at a given yield, or price level, to cover its costs. Since revenue and costs vary from one airline to another..

What is the firms total equity : Hoover Inc. has current assets of $350,000 and fixed plant assets of $650,000. Current liabilities are $100,000 and long-term liabilities are $250,000. There is $120,000 in preferred stock outstanding and the firm has issued 10,000 shares of common s..

User Account

All Pages