exercise_11

exercise_11 - MA826 FINANCE AND FINANCIAL REPORTING...

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MA826 FINANCE AND FINANCIAL REPORTING EXERCISE 11 1. The Otobai Company in Japan is considering the introduction of an electronically powered motor scooter for city use. Information on the expected size of the scooter market, company’s market share, unit price and unit variable cost are given below: Variable Expected (Yen) Market size 1 million Market share 0.1 Unit price 375,000 Unit variable cost 300,000 Fixed cost 3 billion The revenue forecasts are based on the figures expected for the size of the scooter market, the company’s market share and the price of each scooter i.e, Unit Sales = new product’s share of the market × size of scooter market Revenue = unit sales × price per unit The variable cost figure is based on forecasts for unit variable cost so that Variable cost = unit variable cost × volume (a) Assuming that investment is depreciated over 10 years straight line and income is taxed at a rate of 50 percent, complete the table below and calculate the NPV of the project if the opportunity cost of capital is 10 percent. Cash flow forecasts for Otobai’s project. All figures in billions of Yens
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This note was uploaded on 06/07/2011 for the course MA 826 taught by Professor Loba,millet during the Spring '11 term at Kent Uni..

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exercise_11 - MA826 FINANCE AND FINANCIAL REPORTING...

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