Congratulations! You have been selected to assist the financial manager of Daisy Doodle Bots, an up-and-coming toy manufacturer where you have been interning, to assist in the analysis of a potential new project. The project is for the roll-out of a new animated robot, Baby Bobbi, programmed to cry, laugh, and make baby noises. The market research and product development have been testing the prototype and management has strategized how they envision the potential roll-out.

The companys financial manager, Jamie, has been tasked with analyzing the roll-out and offering recommendations. And thats where you come in! You will prepare various analysis and provide your feedback to Jamie. If all goes well, this may result in a full-time position at Daisy Doodle Bots!

Managements estimations are as follows:

Each toy will sell for $54.00

The variable cost per toy is $25.75

Annual fixed costs are expected to be $32,000

This is being analyzed as a five-year project with expected sales as:

Year 1 2,000 units

Year 2 1,900 units

Year 3 1,850 units

Year 4 2,250 units

Year 5 1,900 units

Initial investment cost will be $95,000 which will be depreciated in full via straight-line over the life of the project.

The companys tax rate is 21%.

Required return on projects for Daisy Doddle Bots is 15%

NWC of $10,000 will be required for each year of the project.

Required:

Create a 5-year pro forma statement outlook based on the criteria above. Include calculations for NVP, IRR, and Payback Period. (tab 1)

Management feels that the estimates used are within 5%. Create a scenario analysis comparing the base, best, and worst case outcomes. What is the NPV, IRR and payback period for each of the three scenarios? (tab 2)

There are concerns regarding the reliability of the project regarding the number of unit expected to be sold.. Management feels a sensitivity analysis is needed. Calculate the affects on NPV and IRR if units sold changes by 8%. (tab 3)

TAB 1-

TAB 2-

TAB 3-

Please include all calculations!

Daisy Doodle Bots Project Details Units Sale Price WCirit Fined Costs Depreciation Tan Rate 5-Year Pro Forma Income Statement year 1 year 2 year 3 year 4 year 5 Sales Variable Costs Fined Costs Depreciation EBIT Tas Net Inoome Projected Total Cash Flon (page 290 has erample) \begin{tabular}{r|} Net Present Value = \\ InternalRate of Return = \\ Payback Period = \\ \end{tabular} SCENARIO SUMMARY-Daisy Doodle Bots Total Project Cash Flow: WORSE CASE Sale Price VC/ Unit Fixed Costs Depreciation Tax Rate Sales Variable Costs Fixed Costs Depreciation EBIT Tax Net Income Change in NWC Capital Spending Total Project Cash Flow: Net Present Value = Internal Rate of Return = Payback Period = Single Variable Sensitivity Analysis-Daisy Doodle Bots WORSE CASE Daisy Doodle Bots Project Details Units Sale Price WCirit Fined Costs Depreciation Tan Rate 5-Year Pro Forma Income Statement year 1 year 2 year 3 year 4 year 5 Sales Variable Costs Fined Costs Depreciation EBIT Tas Net Inoome Projected Total Cash Flon (page 290 has erample) \begin{tabular}{r|} Net Present Value = \\ InternalRate of Return = \\ Payback Period = \\ \end{tabular} SCENARIO SUMMARY-Daisy Doodle Bots Total Project Cash Flow: WORSE CASE Sale Price VC/ Unit Fixed Costs Depreciation Tax Rate Sales Variable Costs Fixed Costs Depreciation EBIT Tax Net Income Change in NWC Capital Spending Total Project Cash Flow: Net Present Value = Internal Rate of Return = Payback Period = Single Variable Sensitivity Analysis-Daisy Doodle Bots WORSE CASE