Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk analysis) Blinkeria is considering introducing a...

80.2K

Verified Solution

Question

Finance

image

Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk analysis) 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 xpected to sell for an average price of $104 each, and the company analysts performing the analysis expect that the firm can sell 102,000 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 new technology. In addition, variable costs are expected to be $21 per unit and fixed costs, not including depreciation, are forecast to be $1,030,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for 10.2 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 $301,000 in working capital to support the new business. Other pertinent information concerning the usiness venture is provided here: B: Calculate the project's NPV. Determine the sensitivity of the project's NPV to a(n) 11 percent decrease in the number of units sold. Determine the sensitivity of the project's NPV to a(n) 11 percent decrease in the price per unit. Determine the sensitivity of the project's NPV to a(n) 11 percent increase in the variable cost per unit. Determine the sensitivity of the project's NPV to a(n) 11 percent increase in the annual fixed operating costs. 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: The NPV for the base-case will be $ (Round to the nearest dollar.) x Data Table Data Table - x Initial cost of the machine $10,200,000 Expected life 5 years Salvage value of the machine $0 Working capital requirement $301,000 Depreciation method straight line Depreciation expense $2,040,000 per year Cash fixed costs-excluding depreciation $1,030,000 per year Variable costs per unit $21 Required rate of return or cost of capital 9.9% Tax rate 34% (Click on the icon in order to copy its contents into a spreadsheet.) Expected or Base Case Worst Case Unit sales 102,000 72,420 Price per unit $104 $94.64 Variable cost per unit $(21) S(23.10) Cash fixed costs per year $(1,030,000) $(1,256,600) Depreciation expense $(2,040,000) $(2,040,000) (Click on the icon in order to copy contents into a spreadsheet.) Best Case 131,580 S126.88 S(19.11) $(927,000) $(2,040,000) ter your answer in the answer box ar Print Done parts remaining

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students