Question

FI JCU. 55.5570309 X P13-7 (similar to) E Question Help (Related to Checkpoint 13.2 and Checkpoint 13.3) (Comprehensive risk analysis) Blinkeria is considering introducing a new line of hand scanners that can be used to copy material and then download it into a personal computer. These scanners are expected to sell for an average price of $104 each, and the company analysts performing the analysis expect that the firm can sell 104,000 units per year at this price for a penod of tive years, after which time they expect demand for the product to end as a result of new technology. In addition, variable costs are expected to be 521 per unit and fixed costs, not including depreciation, are forecast to be $1,010,000 per year. To manufacture this product, Blinkeria will need to buy a computerized production machine for $10.3 million that has no residual or salvage value, and will have an expected life of five years. In addition, the firm expects it will have to invest an additional $309,000 in working capital to support the new business. Other pertinent information concerning the business venture is provided here: B: a. Calculate the project's NPV. b. Determine the sensitivity of the project's NPV to an) 11 percent decrease in the number of units sold. c. Determine the sensitivity of the project's NPV to a(n) 11 percent decrease in the price per unit. d. Determine the sensitivity of the project's NPV to a(n) 11 percent increase in the variable cost per unit. Datarmine the coneituit of the priarte NIDV to all 11 narrant incrence in the annual fiverinarstinn roete a. The NPV for the base-case will be $ . (Round to the nearest dollar.) d then click Chock Answer

please explain & show work, thanks!

Answer 1

Net present Value = present value of cash inflow - pr of cash out • Computation of cash inflow at base case o sales pes year 10816000 (104000 x 4104 each) Add! depreciation p.a. 2060000 Annual cash in frow $1287.6000 computatica 4 cash outflow petett 2184000 Vasiable cost p.a. (104000 X$21.4.) Add: fired cost 1010000 Annual cash outflow $3194000 10300000 purchase cost of my Add working capital 309000 1060 9000

computatian f NPU cash outflow cash inflow discounted cash safflow discounted eash inshow year di @10t 10609000 3194000 10609000 12108454 1-5 3.791 12816000 4881916 Total 22717454 4881296 NPV = present value of cash in flow - Dr of cash outflow = 48812916 – 22717454 = $26095462 €