Compute the NPV using the information above.  (SHOW ALL WORK).Compute the financial break-even quantity, i.e., the minimum number of units required to justify investment. (SHOW YOUR WORK, AND BRIEFLY DESCRIBE HOW YOU OBTAINED THE ANSWER.)

Compute the NPV using the information above. (SHOW ALL WORK).Compute the financial break-even quantity, i.e., the minimum number of units required to justify investment. (SHOW YOUR WORK, AND BRIEFLY DESCRIBE HOW YOU OBTAINED THE ANSWER.)

The Flying Toaster Appliance Company is considering a new project. The equipment will cost $30,000, have a six-year life, and be depreciated to a zero salvage value. The tax rate is 40% and the appropriate discount rate is 12%. Fixed costs for additional salaries, utilities, and miscellaneous expenses are expected to be $20,000 per year. Variable costs for each unit are expected to be $40, and the unit price is $60. The expected sales quantity is 1,600 units per year.

(a) Compute the NPV using the information above. (8 points) (SHOW ALL WORK)

(b) Compute the financial break-even quantity, i.e., the minimum number of units required to justify investment. (SHOW YOUR WORK, AND BRIEFLY DESCRIBE HOW YOU OBTAINED THE ANSWER.) (2 points)

· financial break-even quantity =

· brief description of solution:

(c) Compute the best-case and worst-case NPV, assuming the variable cost, fixed cost (except for depreciation), and sales price can all fluctuate up or down by 10% (independent of each other). (SHOW YOUR WORK, AND BRIEFLY DESCRIBE HOW YOU OBTAINED THE ANSWER.) (4 points)

· best-case NPV = _______________

· worst-case NPV = _______________

· brief description of solution:


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