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Assoli18 [71]
3 years ago
10

You are considering a new product launch. The project will cost $2,200,000, have a four-year life, and have no salvage value; de

preciation is straight-line to zero. Sales are projected at 270 units per year; price per unit will be $19,500, variable cost per unit will be $13,100, and fixed costs will be $660,000 per year. The required return on the project is 11 percent, and the relevant tax rate is 25 percent.
a) Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-cast, best-case, and worst-case NPV's? (Round to two decimal places)
b) Evaluate the sensitivity of your base-case NPV to changes in fixed costs. (2 decimal places)
c) What is the cash break-even level of output for this project (ignoring taxes)? (2 decimal places)
d1) What is the accounting break-even level of output for this project? (2 decimal places)
d2) What is the degree of operating leverage at the accounting break-even point? (3 decimal places)
Business
1 answer:
ankoles [38]3 years ago
3 0

Answer:

break-even level of output for this project (ignoring taxes)? (2 decimal places)

d1) What is the accounting break-even level of output for this project? (2 decimal places)

d2) What

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A) $3,429

Explanation:

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B. real-options perspective.

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A) comparing the return to the return on invested capital obtained by other firms in the industry.

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A firm that has developed a competitive advantage over its competitors will to able to either produce the same amount of output using fewer resources, or produce higher output using the same resources than its competitors. A competitive advantage means being more efficient.

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