Scenario Analysis

Question 1: Scenario Analysis

Consider the example company and electric scooterproject. What is the NPV of the electric scooter project under the followingscenario?

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 thepercentage increase in pretax profits after depreciation for a 1% increase insales.

a.      Calculatethe operating leverage for the electric scooter project assuming unit sales are100,000

b.      Nowshow that this figure is equal to 1 + (fixed costs including depreciationdivided by pretax profits).

c.      Wouldoperating leverage be higher or lower if sales were 200,000 scooters?

Question 3:

You are the judge in a settlement case. You need tocompute the value of a piece of land in Denver Co. The valuation is subject tothe following conditions:

1.      Thesettlement will take place at the end of 2019

2.      Thecurrent appraised value of the land on 1/1/2018 is $500.000

3.      Thepiece of land has a building on it that is uninhabitable. It takes one year tobring the building down at a cost of $100,000. That                      money must be paid now.

4.      Theland can be rented in 2019 at a net proceeds of 40,000

5.      Whilerented the land cost $20,000 in property taxes

6.      Yourreal estate adviser notes that selling prices of comparable lands in Denverhave declined, in real terms, at an average rate of 3% per         year over the last 5years.

7.      Thecost of capital is 10%

8.      Thesale of the land at the end of 2019 is subject to a 10 % commission

Your paper should be three pages in length (excluding coverpage and references) and formatted according to APA 7 Standards.   

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