finance

1. A Beth Innovations Inc is planning a project with an investment of $ 15 million to produce a gadget.

The market for the gadget is 10 million gadgets.

Beth intends to capture 10% of the market.

The Variable Cost of each gadget is estimated at $ 10.

The gadget is expected to be sold at $ 20 each.

The Annual Fixed Cost is estimated at $ 3 million.

The initial investment is to be depreciated by Straight Line Method (SLM) over the life of the project, viz 5 years.

The tax rate is 25%.

The Cost of Capital is 10%.

Estimate the annual Revenue & Annual Variable Cost. Calculate the Pre-tax profit. Calculate Profit after tax. Calculate Operating Cash Flow.

Calculate the NPV of the project (give the answer in $ million, up to 2 decimal places)

2. Continuing on previous Question, perform a Sensitivity Analysis to assess the NPV if Beth Innovations captures only 7% market share instead of 10%.

Give answer in $ million.

1b. You are given the following data for year-1.

Revenue = $ 50million;

Total costs = $33million;

Depreciation = $2million;

Tax rate = 40%.

Calculate the operating cash flow for the project for year-1.

Do not enter $ sign in your answer. Round your answer in $ million, eg., if your answer is $27.56 million, just enter 27.

2b. A project has an initial investment of 100.

You have come up with the following estimates of the projects with cash flows.

NPV	Pessimistic	Most  likely	Optimistic
Revenues	15	20	25
Costs	-10	-8	-5

If the cash flows are perpetuities and the Cost of Capital (CoC) is 10%.

If a sensitivity analysis is done (no taxes), what is the NPV in the 'Pessimistic' case? 

All figures are given in $ million. Round your answer to $ million.

3b. Continuing with the data given in question 2b

If the cash flows are perpetuities and the Cost of Capital (CoC) is 10%.

If a sensitivity analysis is done (no taxes),

what is the estimated NPV in the 'Most likely' state?

All figures are given in $ million. Round your answer to $ million.

Continuing with the data given in question 2b

4b. If the cash flows are perpetuities and the Cost of Capital (CoC) is 10%.

If a sensitivity analysis is done (no taxes),

what is the estimated NPV in the Optimistic' state?

All figures are given in $ million. Round your answer to $ million.

5c. Financial Calculator Company proposes to invest $12 million in a new calculator making plant.

Fixed costs are $3 million a year.

A financial calculator costs $10 per unit to manufacture and can be sold for $30 per unit.

If the plant lasts for 4 years and the cost of capital is 20%,

what is the approximate accounting break-even level? (Assume no taxes.)             

6c The Solar Calculator Company proposes to invest $5 million in a new calculator-making plant.

Fixed costs are $2 million per year.

A solar calculator costs $5 per unit to manufacture and sells for $20 per unit.

If the plant lasts for three years and the cost of capital is 12%,

what is the break-even level (i.e., NPV = 0) of annual sales?

(Assume that revenues and costs occur at the end of each year.

Assume no taxes.)

Round your answer to the nearest integer.

Do not include comma sign in your answer.