(Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by 11 percent (either above or below), associated with this new product are shown here: . Since this is a new product line, you are not confident in your estimates and would like to know how well you will fare if your estimates on the items listed above are 11 percent higher or 11 percent lower than expected. Assume that this new product line will require an initial outlay of $1.19 million, with no working capital investment, and will last for 10 years, being depreciated down to zero using straight-line depreciation. In addition, the firm's required rate of return or cost of capital is 9.7 percent, and the firm's marginal tax rate is 34 percent. Calculate the project's NPV under the "best-case scenario" (that is, use the high estimates-unit price 11 percent above expected, variable costs 11 percent less than expected, fixed costs 11 percent less than expected, and expected sales 11 percent more than expected). Calculate the project's NPV under the "worst-case scenario." The NPV for the best-case scenario will be $ (Round to the nearest dollar.) Data Table Unit price: $125 Variable costs: $77 Fixed costs: $249,000 per year Expected sales: 10,500 per year (Click on the icon in order to copy its contents into a spreadsheet.)
(Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by 11 percent (either above or below), associated with this new product are shown here: . Since this is a new product line, you are not confident in your estimates and would like to know how well you will fare if your estimates on the items listed above are 11 percent higher or 11 percent lower than expected. Assume that this new product line will require an initial outlay of $1.19 million, with no working capital investment, and will last for 10 years, being depreciated down to zero using straight-line depreciation. In addition, the firm's required rate of return or cost of capital is 9.7 percent, and the firm's marginal tax rate is 34 percent. Calculate the project's NPV under the "best-case scenario" (that is, use the high estimates-unit price 11 percent above expected, variable costs 11 percent less than expected, fixed costs 11 percent less than expected, and expected sales 11 percent more than expected). Calculate the project's NPV under the "worst-case scenario." The NPV for the best-case scenario will be $ (Round to the nearest dollar.) Data Table Unit price: $125 Variable costs: $77 Fixed costs: $249,000 per year Expected sales: 10,500 per year (Click on the icon in order to copy its contents into a spreadsheet.)
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter9: Working Capital
Section: Chapter Questions
Problem 10Q
Related questions
Question
How do you do this question?
Transcribed Image Text:(Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of a child's shoe,
which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by 11 percent (either above or below),
will fare if your estimates on the items listed above are 11 percent higher or 11 percent lower than expected. Assume that this new product line will require an initial
outlay of $1.19 million, with no working capital investment, and will last for 10 years, being depreciated down to zero using straight-line depreciation. In addition, the
firm's required rate of return or cost of capital is 9.7 percent, and the firm's marginal tax rate is 34 percent. Calculate the project's NPV under the "best-case scenario"
(that is, use the high estimates-unit price 11 percent above expected, variable costs 11 percent less than expected, fixed costs 11 percent less than expected, and
expected sales 11 percent more than expected). Calculate the project's NPV under the "worst-case scenario."
associated with this new product are shown here: . Since this is a new product line, you are not confident in your estimates and would like to know how well you
The NPV for the best-case scenario will be $
(Round to the nearest dollar.)
Data Table
Unit price:
$125
Variable costs:
$77
Fixed costs:
$249,000 per year
Expected sales: 10,500 per year
(Click on the icon D in order to copy its contents into a spreadsheet.)
Print
Done
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you