Homework Answers
| Base case | Best case = base case value*(1+growth rate) | Worst case = base value*(1+growth rate) | |||||
| Units sold | 86400 | 86400*1.1 | 95040 | 86400*0.9 | 77760 | ||
| selling price | 38.01 | 38.01*1.1 | 41.811 | 38.01*0.9 | 34.209 | ||
| variable cost | 23.25 | 23.25*1.1 | 25.575 | 23.25*0.9 | 20.925 | ||
| Total fixed cost | 818000 | 818000*1.1 | 899800 | 818000*0.9 | 736200 | ||
| Best Case NPV | |||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Initial Investment | -1710000 | ||||||
| sales= units sold*selling price | 3973717.44 | 3973717.44 | 3973717.44 | 3973717.44 | 3973717 | 3973717 | |
| variable cost = units sold*variable cost | 2430648 | 2430648 | 2430648 | 2430648 | 2430648 | 2430648 | |
| fixed cost | 899800 | 899800 | 899800 | 899800 | 899800 | 899800 | |
| annual depreciation | 285000 | 285000 | 285000 | 285000 | 285000 | 285000 | |
| operating profit | 358269.44 | 358269.44 | 358269.44 | 358269.44 | 358269.4 | 358269.4 | |
| less taxes-21% | 75236.5824 | 75236.5824 | 75236.5824 | 75236.5824 | 75236.58 | 75236.58 | |
| after tax profit | 283032.8576 | 283032.8576 | 283032.8576 | 283032.8576 | 283032.9 | 283032.9 | |
| add depreciation | 285000 | 285000 | 285000 | 285000 | 285000 | 285000 | |
| net operating cash flow | -1710000 | 568032.8576 | 568032.8576 | 568032.8576 | 568032.8576 | 568032.9 | 568032.9 |
| present value factor at 9% =1/(1+r)^n | 1 | 0.917431193 | 0.841679993 | 0.77218348 | 0.708425211 | 0.649931 | 0.596267 |
| present value of cash flow = net operating cash flow*present value factor | -1710000 | 521131.062 | 478101.8918 | 438625.5888 | 402408.797 | 369182.4 | 338699.4 |
| Net present value of best case =sum of present value factor*net operating cash flow | 838149.16 | ||||||
| Worst Case NPV | |||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Initial Investment | -1710000 | ||||||
| sales | 2660091.84 | 2660091.84 | 2660091.84 | 2660091.84 | 2660092 | 2660092 | |
| variable cost | 1627128 | 1627128 | 1627128 | 1627128 | 1627128 | 1627128 | |
| fixed cost | 736200 | 736200 | 736200 | 736200 | 736200 | 736200 | |
| annual depreciation | 285000 | 285000 | 285000 | 285000 | 285000 | 285000 | |
| operating profit | 11763.84 | 11763.84 | 11763.84 | 11763.84 | 11763.84 | 11763.84 | |
| less taxes-21% | 2470.4064 | 2470.4064 | 2470.4064 | 2470.4064 | 2470.406 | 2470.406 | |
| after tax profit | 9293.4336 | 9293.4336 | 9293.4336 | 9293.4336 | 9293.434 | 9293.434 | |
| add depreciation | 285000 | 285000 | 285000 | 285000 | 285000 | 285000 | |
| net operating cash flow | -1710000 | 294293.4336 | 294293.4336 | 294293.4336 | 294293.4336 | 294293.4 | 294293.4 |
| present value factor at 9% =1/(1+r)^n | 1 | 0.917431193 | 0.841679993 | 0.77218348 | 0.708425211 | 0.649931 | 0.596267 |
| present value of cash flow = net operating cash flow*present value factor | -1710000 | 269993.9758 | 247700.8952 | 227248.5277 | 208484.8878 | 191270.5 | 175477.6 |
| Net present value of best case =sum of present value factor*net operating cash flow | -389823.62 |
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