I need support with this Business question so I can learn better.
1.) You and a Classmate decide to start a manufacturing skateboards for a skateboard sharing company. This is a five year project that requires an initial investment of $600,000 in a machinery that will be fully deprecated in a straight line over the five years. The machinery has no salvage value. You believe that you can sell 11,750 units in year one at a price of $65 per unit. You expect sales volume to grow at 8%. The units have a variable cost of $22 and has fixed costs of $130,000 annually. The tax rate is 21% and your cost of capital is 18%. What is the NPV of the project?
2.)You are the CFO of Boss Enterprises. You are considering a four-year project that requires an initial investment of $525,000 in a machinery that will be fully deprecated in a straight line over the four years. The machinery has no salvage value. You believe that you can sell 82,000 units at a price of $45 per unit. The units have a variable cost of $30 and fixed costs of $220,000 annually. The tax rate of Boss is 23% and your cost of capital is 8%. The CEO is concerned with the Sales departments projections and would like to know how sensitive Operating Cash Flow is to sales.
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