I have the following completed but definitely need assistance as I know I'm not doing this right. Having troubles knowing which formula to use.

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I have the following completed but definitely need assistance as I know I'm not doing this right. Having troubles knowing which formula to use. You and your friends are thinking about starting a motorcycle company named Apple Valley Choppers. Your initial investment would be $500,000 for depreciable equipment, which should last 5 years, and your tax rate would be 40%. You could sell a chopper for $10,000, assuming your average variable cost per chopper is $3000, and assuming fixed costs, such as rent, utilities and salaries, would be $200,000 per year.       A.  Accounting breakeven: How many choppers would you have to sell to break even, ignoring the costs of financing?        29 choppers would need to sell to break even. Q=Fixed Costs/selling price-variable costsQ=200000/10000-3000Q=28.57Q=29 choppers sold to break even      B.  Financial breakeven: How many choppers would you have to sell to break even, if you required a 15% return? (Hint: Use the 15% as the discount rate and calculate net present value.) Do I use this formula??:NPV=CFt/(1+k)^t Where CF=10,000K=.15T=1       C.  Assuming you could sell 60 choppers per year, what would be your IRR? FV=PV(1+i)^1???       D.  Assuming you could sell 60 choppers per year, what would your selling price have to be to generate a net present value of $150,000 at a 15% discount rate?  Formula???NPV=150,000I=.1560 unitsFV=???       E.   If you could sell 60 choppers in the first year, and your sales volume increased by 5% each year until the end of year 5, what would the net present value be at a 15% discount rate? 1st year: 602nd year: 60*.05=3+60=633rd year: 63*.05=3.15+63=664th year- 66*.05=3.31=66=69.315th year-69.31*.05=3.47+69.31=72.77 NPV=?  i=.15         F.    If you need to invest working capital equal to 10% of the next (coming) year's sales revenue, what would be the effect on the net present value of the project? Do you think that working capital investments always reduce the net present value of projects? No idea.

Question

I have the following completed but definitely need assistance as I know I'm not doing this right. Having troubles knowing which formula to use.

  • Written in: 17-Oct-2019
  • Paper ID: 323665
Price: $ 15
 

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Oct 17, 2019

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