Question 1: Scenario Analysis
Consider the example company and electric scooter project. What is the NPV of the electric scooter project under the following scenario?
Market size: 1.1 million
Market share: 0.1
Unit price: ¥400,000
Unit variable cost: ¥360,000
Fixed cost: ¥2 billion
Question 2: Operating Leverage
Operating leverage is often measured as the percentage increase in pretax profits after depreciation for a 1% increase in sales.
- Calculate the operating leverage for the electric scooter project assuming unit sales are 100,000
- Now show that this figure is equal to 1 + (fixed costs including depreciation divided by pretax profits).
- Would operating leverage be higher or lower if sales were 200,000 scooters?
You are the judge in a settlement case. You need to compute the value of a piece of land in Denver Co. The valuation is subject to the following conditions:
- The settlement will take place at the end of 2019
- The current appraised value of the land on 1/1/2018 is $500.000
- The piece of land has a building on it that is uninhabitable. It takes one year to bring the building down at a cost of $100,000. That money must be paid now.
- The land can be rented in 2019 at a net proceeds of 40,000
- While rented the land cost $20,000 in property taxes
- Your real estate adviser notes that selling prices of comparable lands in Denver have declined, in real terms, at an average rate of 3% per year over the last 5 years.
- The cost of capital is 10%
- The sale of the land at the end of 2019 is subject to a 10 % commission
Your paper should be three pages in length (excluding cover page and references) and formatted according to APA 7 Standards.
Plus Excel Spreadsheet