Managerial Finance

the unit sales, salvage value, and cost of capital. Assume that each of these variables can vary from its expected, or 'obase-case" value by + lUYo, + 20Yo, and + 3}%.Include a sensitivity diagram, and discuss the results. Assume that Sydney Johnson is confident of her estimates of all the variables that affect the project's cash flows except unit sales and sales price. If product acceptance is poor, unit sales could be only approximately 1,000 units a year and the unit price would be set at $150. Conversely, an excellent consumer response could produce sales of 2,000 units and a unit price of 5220. Sidney believes that there is a25Yo chance of poor acceptance, a25Yo chance ofexcellent acceptance, and a50Yo chance ofaverage acceptance (the base case). What is the worst-case NPV? The best-case NPV? Use the worst-, base-, and best'case NPVs and probabilities of occurrence to find the project's expected NPV, standard deviation, and coefficient of variation. Explain scenario analysis and any problems, issues, or concerns that surround this type of projection. Define simulation analysis, ffid discuss its principal advantages and disadvantages. Assume that IOW's average project has a coefficient of variation in the range of 0.2 to 0.4. Would the new product line be classified as high risk, average risk, or 1ow risk? What type of risk is being measured here?

10.IOW typically adds or subtracts 5 percentage points to the overall cost of capital to adjust for risk. Given this consideration, should the new line be accepted? Explain.

1 l.Describe other subjective risk factors that should be considered before the final decision is made, and their individual impact on the project.

Provide all work in your answers that requires calculations. Submit to Turnitin

Prepare this assignment according to the guidelines found in the APA Style Guide

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