We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:...

Question

Question

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Unit Sales Year 10

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

All figures are in 000’s

Year	1	2	3	4	5
Sales	47235	52875	63685	66505	44415
Depreciation	(4400)	(4400)	(4400)	(4400)	(4400)
Change in working capital	(2100)	(846)	(1621.5)	(423)	3313.5
Variable cost	(34170)	(38250)	(46070)	(48110)	(32130)
Fixed cost	(2400)	(2400)	(2400)	(2400)	(2400)
Profit before tax	4165	6979	9193.5	11172	8798.5
Tax	(1457.75)	(2442.65)	(3217.725)	(3910.2)	(3079.475)
Profit after tax	2707.25	4536.35	5975.775	7261.8	5719.025
End year cash flow	7107.25	8936.35	10375.775	11661.8	10119.25

Notes

Sales figure have been calculated as (unit sales)x470
Depriciation = 22000000x0.2= $4400000
Change in working capital for year t = { (Sales for year t+1) - (Sales for year t) }x0.15 for t = 2, 3, 4, 5
Variable cost = (unit sales)x340
Tax = Profit before tax x 0.35
End year cash flow = Profit after tax + Depriciation.

t	Net cash flow
0	- 22000
1	7107.25
2	8936.35
3	10375.775
4	11661.8
5	10119.25+22000x.2=14519.25

Therefore

NPV = -22000 + 7107.25x 1.16^-1 + 8936.35x1.16^-2 +10375.775x1.16^-3 +11661.8x1.16^-⁴ +14519.25x1.16^-5

= 10768.93555

i.e. $10768935.55

Add a comment

Answer 2

Similar Homework Help Questions

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:...

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Unit Sales 99,000 111,000 134,000 140.000 93,000 The new system will be priced to sell at $455 each. The cockroach eradicator project will require $1,800,000 in net working capital to start, and total networking capital will rise to 15% of the change in sales. The variable cost per unit is $325, and total fixed costs are $2,100,000 per year. The equipment necessary to begin...
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:...

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year Unit Sales 1 102,500 2 114,500 3 137,500 4 143,500 5 96,500 The new system will be priced to sell at $490 each. The cockroach eradicator project will require $1,700,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $360, and total fixed costs are $2,800,000...
Project Evaluation. Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant...

Project Evaluation. Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Production of the implants will require $1,500,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1,450,000 per year, variable production costs are $230 per unit, and the units are priced at $355 each. The equipment needed to begin production...

Project Evaluation. Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant...

Project Evaluation. Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 67.500 83.900 98,700 86,000 72,000 Production of the implants will require $1,500,000 in net working capital to start and additional networking capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1,950,000 per year, variable production costs are $230 per unit, and the units are priced at $355...
Aylmer-in-You (AIY) Inc. projects unit sales for a new opera tenor emulation implant as follows: Year...

Aylmer-in-You (AIY) Inc. projects unit sales for a new opera tenor emulation implant as follows: Year Unit Sales 1 98,000 2 112,000 3 122,000 4 142,000 5 87,000 Production of the implants will require $729,000 in net working capital to start and additional net working capital investments each year equal to 25% of the projected sales increase for the following year. (Because sales are expected to fall in Year 5, there is no NWC cash flow occurring for Year 4.)...
Question 3. (25 marks) Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice...

Question 3. (25 marks) Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 91,000 106,000 1 2 111,000 3 104,500 4 5 81,000 Production of the implants will require $1,600,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1,500,000 per year, variable production costs are $265 per...

Aria Acoustics inc projects unit sales for a new seven octave voice emulation implant as follows...

Aria Acoustics inc projects unit sales for a new seven octave voice emulation implant as follows: year 1 74,000 2 87,000 Aria Acoustics, Inc. (AA, projects unit sales for a new seven-octave voice emulation mplant as folows 74,000 87000 3 106 250 98,500 67.800 Production of the implants will require $1750,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year Total fixed...
Aday Acoustics, Inc., projects unit sales for a new 7-octave voice emulation implant as follows: Year...

Aday Acoustics, Inc., projects unit sales for a new 7-octave voice emulation implant as follows: Year nmt Unit Sales 77,100 82,500 89,000 85,400 73,100 Production of the implants will require $1,570,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $4,250,000 per year, variable production costs are $152 per unit, and the units are priced at $334 each....
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year points -NM Unit Sales 73,000 86,000 105,000 97,000 67,000 Skipped eBook Print References Production of the implants will require $1,500,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $3,200,000 per year, variable production costs are $255 per unit, and the...

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year AM Unit Sales 78,000 91,000 105,000 100,000 81,000 Production of the implants will require $1,570,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected sales increase for the following year. Total fixed costs are $1,470,000 per year, variable production costs are $250 per unit, and the units are priced at $365...

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:...

Homework Answers