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You are trying to determine the financial break-even (as we defined in class) market size for the following project. Your project requires the use of a building with a current market value of $176 million, but you already own the building and it is fully depreciated (you will have not new depreciation expenses). There are no other initial investment costs and no annual capital expenditures. The discount rate for the project is 21.99 %. The risk-free rate is 2.51%, and the market risk premium is 6.2%. The project is expected to generate constant annual cash inflows starting in one year and continuing forever. There will be no new NWC requirements. The possible values for Market Share, Price/Unit, VC/Unit, and Fixed Costs are below. Using this information, calculate the financial break-even cash flow. Input your answer in dollars, rounded to the nearest dollar (so if your answer is $5.511 million, input 5,511,000). (Do not plug in the assumed break-even CF value from the next question; it will not get you credit here). Market Share Pessimistic Expected Optimistic 3.5% Price/unit $3350 FC 4.0% 4.5% $3500 $3570 VC/Unit $2900 $2540 $2100 $3.5 Million $2 Million $0.5 Million

You are trying to determine the financial break-even (as we defined in class) market size for the following project. Your project requires the use of a building with a current market value of $176 million, but you already own the building and it is fully depreciated (you will have not new depreciation expenses). There are no other initial investment costs and no annual capital expenditures. The discount rate for the project is 21.99 %. The risk-free rate is 2.51%, and the market risk premium is 6.2%. The project is expected to generate constant annual cash inflows starting in one year and continuing forever. There will be no new NWC requirements. The possible values for Market Share, Price/Unit, VC/Unit, and Fixed Costs are below. Using this information, calculate the financial break-even cash flow. Input your answer in dollars, rounded to the nearest dollar (so if your answer is $5.511 million, input 5,511,000). (Do not plug in the assumed break-even CF value from the next question; it will not get you credit here). Market Share Pessimistic Expected Optimistic 3.5% Price/unit $3350 FC 4.0% 4.5% $3500 $3570 VC/Unit $2900 $2540 $2100 $3.5 Million $2 Million $0.5 Million

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
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You are trying to determine the financial break-even (as we defined in class) market size for the following project. Your project requires the use of a building with a current market value of $176 million, but you already own the building and it is fully depreciated (you will have not new depreciation expenses). There are no other initial investment costs and no annual capital expenditures. The discount rate for the project is 21.99 %. The risk-free rate is 2.51%, and the market risk premium is 6.2%. The project is expected to generate constant annual cash inflows starting in one year and continuing forever. There will be no new NWC requirements. The possible values for Market Share, Price/Unit, VC/Unit, and Fixed Costs are below. Using this information, calculate the financial break-even cash flow. Input your answer in dollars, rounded to the nearest dollar (so if your answer is $5.511 million, input 5,511,000). (Do not plug in the assumed break-even CF value from the next question; it will not get you credit here). Pessimistic Expected Optimistic Market Share 3.5% Price/unit $3350 VC/Unit $2900 FC 4.0% 4.5% $3500 $3570 $2540 $2100 $3.5 Million $2 Million $0.5 Million
Transcribed Image Text:You are trying to determine the financial break-even (as we defined in class) market size for the following project. Your project requires the use of a building with a current market value of $176 million, but you already own the building and it is fully depreciated (you will have not new depreciation expenses). There are no other initial investment costs and no annual capital expenditures. The discount rate for the project is 21.99 %. The risk-free rate is 2.51%, and the market risk premium is 6.2%. The project is expected to generate constant annual cash inflows starting in one year and continuing forever. There will be no new NWC requirements. The possible values for Market Share, Price/Unit, VC/Unit, and Fixed Costs are below. Using this information, calculate the financial break-even cash flow. Input your answer in dollars, rounded to the nearest dollar (so if your answer is $5.511 million, input 5,511,000). (Do not plug in the assumed break-even CF value from the next question; it will not get you credit here). Pessimistic Expected Optimistic Market Share 3.5% Price/unit $3350 VC/Unit $2900 FC 4.0% 4.5% $3500 $3570 $2540 $2100 $3.5 Million $2 Million $0.5 Million
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