Question

Anna is reviewing a new 5-year project with expected sales of 3,400 units, give or take 8 percent. The expected variable cost per unit is $22 and the expected fixed costs are $47,500. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation expense is $33,000. The sale price is estimated at $45 a unit, give or take 3 percent. The project initially requires $165,000 of fixed assets and $42,000 of net working capital. At The end of the project, the networking capital will be recouped and the fixed assets will produce an aftertax cash inflow of $35,000. The tax rate is 14 percent and the discount rate is 14 percent. What is the net present value of the best-case scenario?

Answer #1

Stellar Plastics is analyzing a proposed project. The company
expects to sell 12,000 units, give or take 3 percent. The expected
variable cost per unit is $7.00 and the expected fixed cost is
$35,000. The fixed and variable cost estimates are considered
accurate within a plus or minus 4 percent range. The depreciation
expense is $32,000. The tax rate is 34 percent. The sale price is
estimated at $15.00 a unit, give or take 3 percent. What is the
operating...

ABC Co. is analyzing a
proposed project with anticipated sales of 12,000 units, give or
take 4 percent. The expected variable cost per unit is $7 and the
expected fixed cost is $36,000. The cost estimates have a range of
plus or minus 6 percent. The depreciation expense is $29,600. The
tax rate is 34 percent. The sale price is estimated at $14.99 a
unit, give or take 1 percent. What is the operating cash flow under
the best-case scenario?...

Stellar Plastics is analyzing a proposed project. The company
expects to sell 11,000 units, give or take 3 percent. The expected
variable cost per unit is $8.00 and the expected fixed cost is
$36,000. The fixed and variable cost estimates are considered
accurate within a plus or minus 4 percent range. The depreciation
expense is $31,000. The tax rate is 34 percent. The sale price is
estimated at $16.00 a unit, give or take 4 percent. What is the
operating...

Precise Machinery is analyzing a proposed project. The company
expects to sell 2,100 units, give or take 5 percent. The expected
variable cost per unit is $260 and the expected fixed costs are
$589,000. Cost estimates are considered accurate within a plus or
minus 4 percent range. The depreciation expense is $129,000. The
sales price is estimated at $750 per unit, give or take 2 percent.
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Miller Mfg. is analyzing a proposed project. The company expects
to sell 12,000 units, give or take 3 percent. The expected variable
cost per unit is $8.00 and the expected fixed cost is $34,000. The
fixed and variable cost estimates are considered accurate within a
plus or minus 5 percent range. The depreciation expense is $29,000.
The tax rate is 34 percent. The sale price is estimated at $12.00 a
unit, give or take 4 percent.
What is the earnings...

Hollister & Hollister is considering a new project. The
project will require $522,000 for new fixed assets, $218,000 for
additional inventory, and $39,000 for additional accounts
receivable. Short-term debt is expected to increase by $165,000.
The project has a 6-year life. The fixed assets will be depreciated
straight-line to a zero book value over the life of the project. At
the end of the project, the fixed assets can be sold for 20 percent
of their original cost. The net...

The Can-Do Co. is analyzing a proposed project. The company
expects to sell 12,000 units, give or take 4%. The expected
variable cost per unit is $7 and the expected fixed cost is
$36,000. The fixed and variable cost estimates are considered
accurate within a plus or minus 6% range. The depreciation expense
is $30,000. The tax rate is 34%.The sale price is estimated at $14
a unit, give or take 5%. The company bases its sensitivity analysis
on the...

Bad Company has a new 4-year project that will have annual sales
of 9,200 units. The price per unit is $20.70 and the variable cost
per unit is $8.45. The project will require fixed assets of
$102,000, which will be depreciated on a 3-year MACRS schedule. The
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A firm is deciding on a new project.
Use the following information for the project evaluation and
analysis:
- The initial costs are
$900,000 for fixed assets. The fixed assets will be depreciated
straight line to a zero book value over the 3-year
life of the project. The fixed assets have an estimated salvage
value of $60,000 at the end of the project.
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Bad co. has a new 4-year project that will have annual sales of
7,700 units. The price per unit is $19.20 and the variable cost per
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which will be depreciated on a 3-year MACRS schedule. The annual
depreciation percentages are 33.33 percent, 44.45 percent, 14.81
percent, and 7.41 percent, respectively. Incremental overhead costs
debited to this project are $27,000 per year and the tax rate is 40
percent. What...

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