Chapter_08

Chapter_08 - Chapter 8 Problems 1-30 Input boxes in tan...

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Chapter 8 Problems 1-30 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak and "Solver Add-In."
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Chapter 8 Question 1 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 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 8 Question 2 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 8 Question 3 Input area: Accounting breakeven Unit price Unit variable cost Fixed costs Depreciation a. 130,200 $41 $30 $820,000 ? b. 135,000 ? 56 3,200,000 $1,150,000 c. 5,478 105 ? 160,000 105,000 Output area: a. Depreciation $612,200 b. Unit price $88.22 c. Unit variable cost $56.62
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Chapter 8 Question 4 Input area: Machine cost $200,000 Life of machine 5 Price per unit $25 Variable cost per unit $5 Fixed costs $350,000 Tax rate 25% Discount rate 12% Output area: EAC $55,481.95 Financial breakeven 20,532.13
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Chapter 8 Question 5 Input Area: New machine cash flow $280,000 Price $1,500,000 Pirce decline/year $125,000 Lowest price $1,000,000 Technology life 10 Required return 12% Output Area: Purchase in year: NPV 0 $82,062.45 1 $104,383.88 2 $112,355.82 3 $108,796.91 4 $96,086.55 5 $5,298.26 6 $(75,762.72) You should purchase when the NPV is the highest, which is $112,355.82 when purchased in Year 2
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Chapter 8 Question 6 Input area: Go to market now: Payoff if successful $20,000,000 Payoff if not successful $5,000,000 Probability of success 50% Probability of failure 50% Test market first: Cost of test marketing $2,000,000 Probability of success 75% Probability of failure 25% Discount rate 15% Output area: NPV of going to market now $12,500,000.00 NPV of test marketing $12,130,434.78 The company should go to market now since this option has the highest NPV.
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This note was uploaded on 12/14/2010 for the course FINC 311 taught by Professor Stanley,t during the Fall '08 term at Winthrop.

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Chapter_08 - Chapter 8 Problems 1-30 Input boxes in tan...

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