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26.Samsung Inc.s analysis of the introduction of its iWatch product also includes scenario analysis. Lets examine how the NPV of the project varies over the following three scenarios. Note that Scenario 2 is the base case already analyzed above. Scenario: Market size (Annl. Tot. Mkt. Unit Sales) Samsung Share of Market Unit price 2 1.1 Million 1.0 Million 0.9 Million 11 % $425 10% $400 3% $375 In all scenarios, the initial investment is $30 million, the cost of capital is 12%, annual fixed costs are $3 million, variable costs are $250 per unit, production is for 5 years, and the investment is depreciated on a straight-line basis over the 5-year period to an expected salvage value of zero (in all scenarios). In addition, in all scenarios the profits are taxed at a rate of 40%, and there are no working capital consequences. What is the NPV of the iWatch project under each scenario? a. NPV(1) 1.2 million; NPV(2)-1.1 million; NPV(3)- -5.3 million b. NPV(1) 14.7 million; NPV(2) 3.1 million; NPV(3)-5.9 million c. NPV(1) 18.0 million; NPV(2) 3.1 million; NPV(3) -7.2 million d. NPV(1) 18.0 million; NPV(2) 4,6 million; NPV(3) -5.9 million e. NPV(1) 15.0 million; NPV(2) 4.6 million; NPV (3)-2.5 million f. NPV(1) 21.2 million; NPV(2) 5.4 million; NPV(3) -3.4 million
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