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Excel Solutions - Chapter 11

# Fundamentals of Corporate Finance Standard Edition

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Chapter 11 Problems 1-28 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green

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Chapter 11 Question 1 Input area: Variable material cost \$1.43 Variable labor cost \$2.44 b. Fixed costs \$650,000 Production 320,000 c. Sales price \$10.00 Depreciation \$190,000 Output area: a. Total variable cost \$3.87 b. Total variable cost/year \$1,888,400 c. Cash breakeven 106,036 Accounting breakeven 137,031
Chapter 11 Question 2 Input area: Variable material cost \$16.15 Variable labor cost \$18.50 Sales price \$105.00 Production 150,000 Fixed costs \$800,000 Extra order 10,000 Output area: Total costs \$5,997,500 Marginal cost \$34.65 Average cost \$39.98 Minimum acceptable revenue \$346,500 Additional units should be produced only if the cost of producing those units can be recovered.

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Chapter 11 Question 3 Input area: Price/unit \$1,900 Variable cost/unit \$170 Fixed costs \$6,000,000 Quantity 105,000 Price accuracy 15% Variable cost accuracy 15% Fixed cost accuracy 15% Quantity accuracy 15% Output area: Scenario Unit sales Unit price Unit variable cost Fixed costs Base case 105,000 \$1,900.00 \$170.00 \$6,000,000 Best case 120,750 \$2,185.00 \$144.50 \$5,100,000 Worst case 89,250 \$1,615.00 \$195.50 \$6,900,000
Chapter 11 Question 4 Output area: An estimate for the impact of changes in price on the profitability of the project ca the NPV at any two different price levels and forming the ratio of the changes in th Whenever a sensitivity analysis is performed, all other variables are held constan values the sensitivity of NPV with respect to price: NPV/ P. This measure can be calcu

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an be found from hese parameters. nt at their base-case ulated by finding
Chapter 11 Question 5 Input area: Initial cost \$896,000 Project life 8 Units sales 100,000 Price/unit \$38.00 Variable cost/unit \$25.00 Fixed costs \$900,000 Tax rate 35% Required return 15% b. New quantity for calculation 105,000 Projected sales change (500) c. New VC for calculation \$24.00 Projected VC change \$(1.00) Output area: a. Depreciation per year \$112,000 Accounting breakeven 77,846 DOL 9.036 b. Base OCF \$299,200 Base NPV \$446,606.60 New quantity 105,000 OCF \$341,450 NPV \$636,195.93 \$37.918 For a sales change of (500) the NPV would change \$(18,958.93) c. New variable cost \$24.00 OCF \$364,200 \$(65,000.00) If variable costs change by \$(1.00) then OCF would change by \$65,000.00 NPV/ Q OCF/ VC

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Chapter 11 Question 6 Input area: Initial cost \$896,000 Project life 8 Units sales 100,000 Price/unit \$38.00 Variable cost/unit \$25.00 Fixed costs \$900,000 Tax rate 35% Required return 15% Price uncertainty 10% Quantity uncertainty 10% Variable cost uncertainty 10% Fixed cost uncertainty 10% Output area: Annual depreciation \$112,000 Scenario Unit sales Unit price Unit variable cost Fixed costs Base case 100,000 \$38.00 \$25.00 \$900,000 Best case 110,000 \$41.80 \$22.50 \$810,000 Worst case 90,000 \$34.20 \$27.50 \$990,000 Best-case OCF \$892,650.00 Best-case NPV \$3,109,607.54 Worst-case OCF \$(212,350.00) Worst-case NPV \$(1,848,882.72)

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Chapter 11 Question 7 Input area: Unit price Unit variable cost Fixed costs Depreciation a. \$3,000 \$2,275 \$15,000,000 \$6,500,000 b. 39 27 73,000 140,000 c. 8 3 1,200 840 Output area: a. Accounting breakeven 29,655
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