Question

# ​(Calculating inflation and project cash​ flows) Carlyle Chemicals is evaluating a new chemical compound used in...

​(Calculating inflation and project cash​ flows) Carlyle Chemicals is evaluating a new chemical compound used in the manufacture of a wide range of consumer products. The firm is concerned that inflation in the cost of raw materials will have an adverse effect on the​ project's cash flows.​ Specifically, the firm expects that the cost per unit​ (which is currently \$0.90​) will rise at a rate of 15 percent annually over the next three years. The​ per-unit selling price is currently \$1.01​,and this price is expected to rise at a meager 1 percent annual rate over the next three years. If Carlyle expects to sell 6,7.5​, and 9.5 million units for the next three​ years, respectively, what is your estimate of the​ firm's gross​ profits? Based on this​ estimate, what recommendation would you offer to the​ firm's management with regard to this​ product?

​(Note​:Be sure to round each unit price and unit cost per year to the nearest​ cent.)

The gross profit or​ (loss) for year 1 is (Round to the nearest​ dollar.)

The gross profit or  (loss) for year 2 is (Round to the nearest  dollar.)

The gross profit or  (loss) for year 3 is  (Round to the nearest  dollar.)

 Year 0 1 2 3 a) Unit sales 6,000,000 7,500,000 9,500,000 b) Sale price per unit 1.0201 1.030301 1.04060401 c) revenue (a*b) 6120600 7727257.5 9885738.095 d) variable cost per unit 1.035 1.19025 1.2021525 e) Total variable cost (a*d) 6210000 8926875 11420448.75 f) Gross profit (c-e) -89400 -1199617.5 -1534710.655 Recommendation Since the cashflows are negative,firm should not undertake this project Note Please upvote ifyou like the answer

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