Case study
Sensitivity Analysis [LO1] In Problem 27, suppose you're confident about your own projections, but you're a little unsure about Detroit's actual machine screw requirement. What is the sensitivity of the project OCF to changes in the quantity supplied? What about the sensitivity of NPV to changes in quantity supplied? Given the sensitivity number you calculated, is there some minimum level of output below which you wouldn't want to operate? Why?
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Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production. You will need an initial $5,900,000 investment in threading equipment to get the project started, the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,425,000 and that variable costs should be $270 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $5,200,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,250,000 and that variable costs should be $235 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $4,500,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,075,000 and that variable costs should be $200 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $4,600,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,100,000 and that variable costs should be $205 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $4,600,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,100,000 and that variable costs should be $205 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $6,000,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,450,000 and that variable costs should be $275 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $4,500,000 investment in threading equipment to get the project started: the project will last for 5 vears. The accounting department estimates that annual fixed costs will be $1,075,000 and that variable costs should be $200 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Chapter 11 Problemsi Saved 10 Consider a project to supply Detroit with 27,000 tons of machine...
Chapter 11 Problemsi Saved 10 Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,000,000 investment in threading equipment to get the project started, the project Will last for 5 years. The accounting department estimates that annual fixed costs willl be $1,200,000 and that variable costs should be $225 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It...
Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production....
Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3,600,000 Investment in threading equipment to get the project started, the project will last for 4 years. The accounting department estimates that annual fixed costs will be $850,000 and that variable costs should be $240 per ton; accounting will depreciate the initial fixed asset Investment straight-line to zero over the 4-year project life. It also estimates a salvage value...
QUESTION 2 – SENSITIVITY ANALYSIS (25 POINTS) Consider a project to supply Detroit with 40,000 tons...
QUESTION 2 – SENSITIVITY ANALYSIS (25 POINTS) Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production. You will need an initial $5,600,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $600,000 and that variable costs should be $250 per ton. Further, the accounting department will depreciate the initial fixed asset investment straight-line to zero over...
Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production. You will need an initial $5,900,000 investment in threading equipment to get the project started, the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,425,000 and that variable costs should be $270 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $5,200,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,250,000 and that variable costs should be $235 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $4,500,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,075,000 and that variable costs should be $200 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $4,600,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,100,000 and that variable costs should be $205 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $4,600,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,100,000 and that variable costs should be $205 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $6,000,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,450,000 and that variable costs should be $275 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value...
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $4,500,000 investment in threading equipment to get the project started: the project will last for 5 vears. The accounting department estimates that annual fixed costs will be $1,075,000 and that variable costs should be $200 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value...
Chapter 11 Problemsi Saved 10 Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,000,000 investment in threading equipment to get the project started, the project Will last for 5 years. The accounting department estimates that annual fixed costs willl be $1,200,000 and that variable costs should be $225 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It...
Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3,600,000 Investment in threading equipment to get the project started, the project will last for 4 years. The accounting department estimates that annual fixed costs will be $850,000 and that variable costs should be $240 per ton; accounting will depreciate the initial fixed asset Investment straight-line to zero over the 4-year project life. It also estimates a salvage value...
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