The Lazy Mower.xlsx - Qu 1 Year Price Sales(units 0 1 2 3 4...

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Qu 1) Year Sales (units) Price Revenues Variable Costs 0 1 30,000 1,000 30,000,000 12,000,000 2 34,000 1,000 34,000,000 13,600,000 3 38,800 1,000 38,800,000 15,520,000 4 38,000 950 36,100,000 15,200,000 5 36,000 950 34,200,000 14,400,000 6 36,000 950 34,200,000 14,400,000 7 35,500 950 33,725,000 14,200,000 8 35,000 900 31,500,000 14,000,000 9 34,500 900 31,050,000 13,800,000 10 34,000 900 30,600,000 13,600,000 QU 2) Scenario Analysis NPV IRR Initial Sales Value $46,116,879.91 60.80% $56,068,674.42 69.61% $36,165,085.40 51.74% Qu 3) NPV Cost per Unit $46,116,880 -20% $320 $36,893,504 Fixed Costs -10% $360 $41,505,192 -20% 0% $400 $46,116,880 -10% 10% $440 $50,728,568 0% Sales Optimistic (+15%) Sales Pessimistic (-15%) The only variables that can be affected by the market factors like competition, inflation, and recession are sel unit and the price per unit. Sometimes fixed costs can be affected as well. Price per unit has been adjusted o allow for downward trends due to competitive pressure. However, cost sensitivity needs to be anal
20% $480 $55,340,256 10% 20% NPV Price per Unit $46,116,880 -20% $23,211,767 -10% $34,664,323 0% $46,116,880 10% $57,569,437 20% $69,021,993 Qu 4) Qu 5) Qu 6) Sunk costs should not be included in the analysis. Qu 7) Qu 8) The higher the cost of capital the lower the value of the NPV. NPV and WACC are negatively correla Qu 9) Degree of Operating Leverage = 1 + (Fixed Cost/Operating Cash Flow) Where Operating Cash Flow = (P - VC)*Q - FC When calculating the annual cash flows, the interest expense should not be substracted. Interest is included in

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