Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer. These scanners are expected to sell for an average price of

$102

each, and the company analysts performing the analysis expect that the firm can sell

101,000

units per year at this price for a period of five years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be

$20

per unit and fixed costs, not including depreciation, are forecast to be

$1,090,000

per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for

$9.9

million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional

$307,000

in working capital to support the new business. Other pertinent informationconcerningthe business venture is provided here:

a.Calculate the project's NPV.

b.Determine the sensitivity of the project's NPV to a(n)

10

percent decrease in the number of units sold.

c.Determine the sensitivity of the project's NPV to a(n)

10

percent decrease in the price per unit.

d.Determine the sensitivity of the project's NPV to a(n)

10

percent increase in the variable cost per unit.

e.Determine the sensitivity of the project's NPV to a(n)

10

percent increase in the annual fixed operating costs.

f.Use scenario analysis to evaluate the project's NPV under worst- and best-case scenarios for the project's value drivers. The values for the expected or base-case along with the worst- and best-case scenarios are listed here:

P13-7 (similar to) Question Help Related to Checkpoint 13.2 and Checkpoint 133 (Comprehensive risk analysis) Blinkeria is considering introducing a new line of hand scanners Shut can be used to copy material and then download it into a personal computer These scanners are expected to sell for an average price of $102 each, and the company analysts performing the analysis expect that the fem can sell 101000 units per year at this price for a period of fire years after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be 520 per unit and find costs, not including depreciation, ore forecant to be $1.090.000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for 599 million that has no residual or salvage value and will have an expected of Sve years. In addition, the firm expects I will have to livest an additional 5297,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here a. Calculate the projects NPV b. Demine the entity of the proje NPV to an 10 percent decrease in the number of units sold c. Determine the sensitivity of the projects NPV to ain) 10 percent decrease in the price per unit d. Determine the city of the project's NPV to n) 10 percent increase in the variabile cost per unit Determine the sensitivity of the projects NPV to) percent increase in the fixed operating costs 1. Use scenario analysis to evaluate the project's NPV underwent and best case scenarios for the projects value drivers The values for the expected or basecase along with the wont and best case scenarios are listed here a. The NPV for the base-case wit be found to the nearest dollar) 0 Data e - X Data Table Inital cost of the machine $9.900,000 Expected life 5 years Salvage value of the machine 50 Working capital requirement 5307 000 Depreciation method wraight line Depreciation expense $1,900.000 per year Cash fixed cost-excluding depreciation $1.090.000 per year Variable costs per unit 520 Required rate of return of cost of capital 10.9% Tax rate HE on the ocopy to conne) Expected of Base Case Unit sales 101.000 Price per un 5102 Variable cost per unit $(20) Cash feed costs per year $1.000.000) Depreciation expense $1,950 000) (Corante con todo con la pre Worst Cave 68.686 1910 (2220) 51206,200) 1.900.000) Best Case 133320 31200 $(1620) (99 200 1.900,000) Print Dane Print Done Enter your answer in the answer box and then click Check Answer punts remaining Clea Check Data de Data Table Initial cost of the machine Expected te Salvage value of the machine Working capital requirement Depreciation method Depreciation expense Cash fixed co-excluding depreciation Variable costs per unit Required to return of cost of capital Tax rate (ack onder coco $9.900 000 5 years 50 $307.000 straight 51 900 000 per year $1,090 000 per your 520 10 SA 344 Expected of Base Case Wort Unit sales 101 od 55500 Price per unit 5102 391 Variable cost per unit 5020) 502220) Cash fixed costs per year $1.090,000) S. 206.2001 Depreciation expense (1.500.000) 51.930,000) Click on your door) Best Case 133320 512036 311820) 5,959,200) $11.900.000 Done Pent Done Data Table Data Table Initial cost of the machine $9.900.000 Expected life 5 years Salvage value of the machine 50 Working capital requirement 5307.000 Depreciation method straight line Depreciation expense $1.500.000 per year Cash fixed costs-excluding depreciation $1.090.000 per year Variable costs per unit 520 Required rate of return or cost of capital 10.9% Tax rate 34% (Click on the icon order to copy its contentando a preudaeol) Expected or Base Case Worst Case Unit sales 101000 68 680 Price per unit 5102 59180 Variable cost per unit 5(20) 52220) Cash fixed costs per year $(1.090,000) 5(1,285,200) Depreciation expense $(1.980.000) ${1,980,000) (Click on the con order to copy to content into a predoheet) Best Case 133 320 5120-36 $(1820) $1959.2001 5(1,900,000) Print Done Print Done X i Data Table Initial cost of the machine $9.900.000 Expected life 5 years Salvage value of the machine $0 Working capital requirement $307,000 Depreciation method straight line Depreciation expense $1,980,000 per year Cash fixed costs-excluding depreciation $1,090,000 per year Variable costs per unit $20 Required rate of return or cost of capital 10.9% Tax rate 34% (Click on the icon in order to copy its contents into a spreadsheet.) (C Print Done