Sloan Corporation has the following estimates for its new gear assembly product: Price per unit = $1,220 Variable cost per unit = $380 Fixed costs = $3.75 million Quantity = 90,000 units Suppose the company believes all its estimates are accurate only to within +/- 15%. A. What values should the company use for the four variables given here when it performs its best- case scenario analysis? B. What should it use for its worse-case scenarios analysis? C. Are there any potential concerns with the building of these scenarios?
Sloan Corporation has the following estimates for its new gear assembly product: Price per unit = $1,220 Variable cost per unit = $380 Fixed costs = $3.75 million Quantity = 90,000 units Suppose the company believes all its estimates are accurate only to within +/- 15%. A. What values should the company use for the four variables given here when it performs its best- case scenario analysis? B. What should it use for its worse-case scenarios analysis? C. Are there any potential concerns with the building of these scenarios?
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 7P
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Sloan Corporation has the following estimates for its new gear assembly product:
Price per unit = $1,220
Variable cost per unit = $380
Fixed costs = $3.75 million
Quantity = 90,000 units
Suppose the company believes all its estimates are accurate only to within +/- 15%.
A. What values should the company use for the four variables given here when it performs its best-
case scenario analysis?
B. What should it use for its worse-case scenarios analysis?
C. Are there any potential concerns with the building of these scenarios?
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