Chapter 11 Problems 1-32 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadshe the "Analysis ToolPak" or "Solver Add-In" be To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK."
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Chapter 11Problems 1-32
Input boxes in tanOutput boxes in yellowGiven data in blueCalculations in redAnswers in green
NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.To install these, click on the Office button then "Excel Options," "Add-Ins" and select"Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK."
NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.
Chapter 11Question 1
Input area:
Variable material cost $ 5.43 Variable labor cost $ 3.13
b. Fixed costs $ 720,000 Production 280,000
c. Sales price $ 19.99 Depreciation $ 220,000
Output area:
a. Total variable cost $ 8.56
b. Total variable cost/year $ 3,116,800
c. Cash breakeven 62,992.13 Accounting breakeven 82,239.72
Chapter 11Question 2
Input area:
Variable material cost $ 24.86 Variable labor cost $ 14.08 Sales price $ 135.00 Production 120,000 Fixed costs $ 1,550,000 Extra order 5,000
Output area:
Total costs $ 6,222,800 Marginal cost $ 38.94 Average cost $ 51.86 Minimum acceptable revenue $ 194,700 Additional units should be produced only if the costof producing those units can be recovered.
Scenario Unit sales Unit price Unit variable cost Fixed costsBase case 95,000 $ 1,900.00 $ 240.00 $ 4,800,000 Best case 109,250 $ 2,185.00 $ 204.00 $ 4,080,000 Worst case 80,750 $ 1,615.00 $ 276.00 $ 5,520,000
Chapter 11Question 4
Output area:
An estimate for the impact of changes in price on the profitability of the project can be found from
the NPV at any two different price levels and forming the ratio of the changes in these parameters.Whenever a sensitivity analysis is performed, all other variables are held constant at their base-casevalues
the sensitivity of NPV with respect to price: DNPV/DP. This measure can be calculated by finding
An estimate for the impact of changes in price on the profitability of the project can be found from
the NPV at any two different price levels and forming the ratio of the changes in these parameters.Whenever a sensitivity analysis is performed, all other variables are held constant at their base-case
Base case OCF $ 722,050.00 Base case NPV $ 493,118.10
Best case OCF $ 984,832.00 Best case OCF $ 1,291,278.83
Worst case OCF $ 486,932.00 Worst case NPV $ (221,017.41)
b. OCF with fixed costs $ 420,000.00
OCF $ 715,550.00 NPV $ 473,375.32
$ (1.974)For every dollar FC increase, NPV changes by: $ (1.974)
c. Cash breakeven 60
d. Accounting breakeven 123 At this level of output, DOL 1.9647 For every 1% increase in unit sales,OCF will increase by 1.9647%
DNPV/DFC
Chapter 11Question 20
Input area:
Price per unit $ 750 Variable cost per unit $ 330 Marketing study $ 150,000 Sunk costUnit sales 51,000 High price units lost 11,000 High price club's price $ 1,200 High price club's VC $ 650 Cheap club units gained 9,500 Cheap club's price $ 420 Cheap club's VC $ 190 Fixed costs $ 8,100,000 R&D $ 1,000,000 Sunk costProject cost $ 22,400,000 Net working capital $ 1,250,000 Tax rate 40%Cost of capital 10%
Project cost $ 22,400,000 Unit sales 51,000 Price per unit $ 750 Variable cost per unit $ 330 Fixed costs $ 8,100,000 Lost high price units lost 11,000 High price club's price $ 1,200 High price club's VC $ 650 Cheap club units gained 9,500 Cheap club's price $ 420 Cheap club's VC $ 190 Marketing study $ 150,000 Sunk costR&D $ 1,000,000 Sunk costNet working capital $ 1,250,000 Tax rate 40%Cost of capital 10%Uncertainty 10%
Output area:
Best case Worst CaseUnit sales (new clubs) 56,100 45,900 Price (new clubs) $ 825 $ 675 VC (new clubs) $ 297 $ 363 Fixed cost $ 7,290,000 $ 8,910,000 Sales lost (high-priced) 9,900 12,100 Sales gained (cheap) 10,450 8,550
Best case Worst CaseNew club sales $ 46,282,500 $ 30,982,500 High-priced sales lost (11,880,000) (14,520,000)Cheap sales gained 4,389,000 3,591,000 Total sales $ 38,791,500 $ 20,053,500
New club VC $ (16,661,700) $ (16,661,700)High-priced VC saved 6,435,000 7,865,000 Cheap club VC (1,985,500) (1,624,500)Total VC $ (12,212,200) $ (10,421,200)
Total Sales $ 38,791,500 $ 20,053,500 Total VC 12,212,200 10,421,200 Fixed costs 7,290,000 8,910,000 Depreciation 3,200,000 3,200,000 EBIT $ 16,089,300 $ (2,477,700)Taxes 6,435,720 (991,080)Net income $ 9,653,580 $ (1,486,620)
Project cost $ 22,400,000 Unit sales 51,000 Price per unit $ 750 Variable cost per unit $ 330 Fixed costs $ 8,100,000 Lost high price units lost 11,000 High price club's price $ 1,200 High price club's VC $ 650 Cheap club units gained 9,500 Cheap club's price $ 420 Cheap club's VC $ 190 Marketing study $ 150,000 Sunk costR&D $ 1,000,000 Sunk costNet working capital $ 1,250,000 Tax rate 40%Cost of capital 10%New price $ 800 New quantity 52,000
Additional purchase price $ 5,450 Total annual cost $ 400 Hybrid mpg 25 Sedan mpg 23
a. Gasoline $ 3.60 Years to keep car 6
b. Miles per year 15,000
c. Interest rate 10%
Output area:
a. Total additional cost $ 7,850 Traditional cost per mile $ 0.156522 Hydrid cost per mile $ 0.144000 Cost savings per mile $ 0.012522 Total miles driven 626,910
Miles per year 104,485
b. Total miles 90,000 Cost savings per mile $ 0.08722
Price per gallon $ 25.08
c. PV of annual cost $ 1,742.10 Total discounted cost $ 7,192.10 Discounted savings $ 574,369.44