Company Name Cold and Sweet

Investment $ 900,000
Machine Estimate Life 10
Machine Used 5
Depreciation/ year $ 90,000
Sales Price of The Machine n=6 - 10 $ 100,000
Capacity $ 1,000,000 Maximum
Marketing Cost 1 $ 30,000
Marketing Cost 2 - 4 $ 10,000
Sales Unit 400,000
Unit Price $ 1.30
Variable Cost $ 0.50
Other Cost $ 40,000
Discount Rate 0.14
Corporate Tax 0.30

Decsription Year 1 Year 2 Year 3

Sales $ 520,000 520,000 520,000
Variable cost $ -200,000 $ -200,000 $ -200,000
Marketing Cost $ -30,000 $ -10,000 $ -10,000
Fixed Cost / Annual Cost For Development $ -40,000 $ -40,000 $ -40,000
Amortization and depre $ -90,000 $ -90,000 $ -90,000
EBT $ 160,000 $ 180,000 $ 180,000
Corporate Taxes $ 48,000 $ 54,000 $ 54,000
Net Income $ 112,000 $ 126,000 $ 126,000
Other Income $ - - -
Defined Taxes Benefit $ - $ - $ -
FCF $ 202,000 $ 216,000 $ 216,000
NPV - 64,265
 Book Value Year 5
Selling Price
Loss on Selling Machine
Tax Benefit

Year 4 Year 5
520,000 520,000
$ -200,000 $ -200,000
$ -10,000 $ -10,000
$ -40,000 $ -40,000
$ -90,000 $ -90,000
$ 180,000 $ 180,000
$ 54,000 $ 54,000
$ 126,000 $ 126,000
- 100,000
$ - $ 105,000
$ 216,000 $ 421,000
450,000
100,000
350,000
105,000
Company Name Cold and Sweet
Investment $ 900,000
Machine Estimate Life 10
Machine Used 5
Depreciation/ year $ 90,000
Sales Price of The Machine n=6 - 10 $ 100,000
Capacity $ 1,000,000 Maximum
Marketing Cost 1 $ 30,000
Marketing Cost 2 - 4 $ 10,000
Sales Unit 400,000
Unit Price $ 1.37
Variable Cost $ 0.50
Other Cost $ 40,000
Discount Rate 0.14
Corporate Tax 0.30

Decsription Year 1 Year 2 Year 3

Sales $ 546,742 546,742 546,742
Variable cost $ -200,000 $ -200,000 $ -200,000
Marketing Cost $ -30,000 $ -10,000 $ -10,000
Fixed Cost / Annual Cost For Development $ -40,000 $ -40,000 $ -40,000
Amortization and depre $ -90,000 $ -90,000 $ -90,000
EBT $ 186,742 $ 206,742 $ 206,742
Corporate Taxes $ 56,023 $ 62,023 $ 62,023
Net Income $ 130,719 $ 144,719 $ 144,719
Other Income $ - - -
Defined Taxes Benefit $ - $ - $ -
FCF $ 220,719 $ 234,719 $ 234,719
NPV -

The answer for unit price to get break even point is 1.37, so the unit price should be higher than 1.37 to be profitable
 Book Value Year 5
Selling Price
Loss on Selling Machine
Tax Benefit

Year 4 Year 5
546,742 546,742
$ -200,000 $ -200,000
$ -10,000 $ -10,000
$ -40,000 $ -40,000
$ -90,000 $ -90,000
$ 206,742 $ 206,742
$ 62,023 $ 62,023
$ 144,719 $ 144,719
- 100,000
$ - $ 105,000
$ 234,719 $ 439,719

han 1.37 to be profitable

450,000
100,000
350,000
105,000
Company Name Cold and Sweet
Investment $ 900,000
Machine Estimate Life 10
Machine Used 5
Depreciation/ year $ 90,000
Sales Price of The Machine n=6 - 10 $ 100,000
Capacity $ 1,000,000 Maximum
Marketing Cost 1 $ -
Marketing Cost 2 - 4 $ -
Sales Unit 414,539
Unit Price $ 1.30
Variable Cost $ 0.50
Other Cost $ 40,000
Discount Rate 0.14
Corporate Tax 0.30

Decsription Year 1 Year 2 Year 3

Sales $ 538,901 538,901 538,901
Variable cost $ -207,270 $ -207,270 $ -207,270
Marketing Cost $ - $ - $ -
Fixed Cost / Annual Cost For Development $ -40,000 $ -40,000 $ -40,000
Amortization and depre $ -90,000 $ -90,000 $ -90,000
EBT $ 201,632 $ 201,632 $ 201,632
Corporate Taxes $ 60,489 $ 60,489 $ 60,489
Net Income $ 141,142 $ 141,142 $ 141,142
Other Income $ - - -
Defined Taxes Benefit $ - $ - $ -
FCF $ 231,142 $ 231,142 $ 231,142
NPV -

Using Scenario Manager to decrease the marketing cost

Use Goalseek to find minimum quantity for break - even point, then decide to produce more than 414.539 unit if the ma
 Book Value Year 5
Selling Price
Loss on Selling Machine
Tax Benefit

Year 4 Year 5
538,901 538,901
$ -207,270 $ -207,270
$ - $ -
$ -40,000 $ -40,000
$ -90,000 $ -90,000
$ 201,632 $ 201,632
$ 60,489 $ 60,489
$ 141,142 $ 141,142
- 100,000
$ - $ 105,000
$ 231,142 $ 436,142

more than 414.539 unit if the marketing cost is decrease

450,000
100,000
350,000
105,000
Company Name Cold and Sweet
Investment $ 900,000
Machine Estimate Life
10
Machine Used 5
Depreciation/ year $ 90,000
Sales Price of The
Machine n=6 - 10 $ 100,000
Capacity $ 1,000,000 Maximum
Marketing Cost 1 $ 30,000
Marketing Cost 2 - 4 $ 10,000
Sales Unit 400,000
Unit Price $ 1.30
Variable Cost $ 0.50
Other Cost $ 40,000
Discount Rate 0.14
Corporate Tax 0.30

Decsription Year 1 Year 2 Year 3 Year 4

Sales $ 520,000 520,000 520,000 520,000
Variable cost $ -200,000 $ -200,000 $ -200,000 $ -200,000
Marketing Cost $ -30,000 $ -10,000 $ -10,000 $ -10,000
Fixed Cost / Annual
Cost For Development $ -40,000 $ -40,000 $ -40,000 $ -40,000
Amortization and
depre $ -90,000 $ -90,000 $ -90,000 $ -90,000
EBT $ 160,000 $ 180,000 $ 180,000 $ 180,000
Corporate Taxes $ 48,000 $ 54,000 $ 54,000 $ 54,000
Net Income $ 112,000 $ 126,000 $ 126,000 $ 126,000
Other Income $ - - - -
Defined Taxes Benefit $ - $ - $ - $ -
FCF $ 202,000 $ 216,000 $ 216,000 $ 216,000
NPV - 64,265

The marketing vice president would like some sensitivity analysis done. He asks what the NPV of the project would be if annual

Sensitivity Analysis
Current NPV Unit Price
- 64,265 1.20 1.30 1.40 1.50
300,000 - 328,611.87 - 256,517.17 - 184,422.47 - 112,327.77
350,000 - 244,501.39 - 160,390.90 - 76,280.42 7,830.06
400,000 - 160,390.90 - 64,264.64 31,861.63 127,987.90
450,000 - 76,280.42 31,861.63 140,003.68 248,145.73
500,000 7,830.06 127,987.90 248,145.73 368,303.57
550,000 91,940.55 224,114.17 356,287.78 488,461.40
600,000 176,051.03 320,240.43 464,429.83 608,619.23
650,000 260,161.52 416,366.70 572,571.88 728,777.07
700,000 344,272.00 512,492.97 680,713.93 848,934.90
 Book Value Year 5 450,000
Selling Price 100,000
Loss on Selling Machine 350,000
Tax Benefit 105,000

Year 5
520,000
$ -200,000
$ -10,000

$ -40,000

$ -90,000
$ 180,000
$ 54,000
$ 126,000
100,000
$ 105,000
$ 421,000

e NPV of the project would be if annual unit sales vary from 300,000, 350,000,…, 700,000 and if the unit price per bar varies from $1.20,$

1.60 1.70
- 40,233.07 31,861.63
91,940.55 176,051.03
224,114.17 320,240.43
356,287.78 464,429.83
488,461.40 608,619.23
620,635.02 752,808.63
752,808.63 896,998.03
884,982.25 1,041,187.44
1,017,155.87 1,185,376.84
ce per bar varies from $1.20,$1.30,…,$1.70
Company Name Cold and Sweet
Investment $ 900,000
Machine Estimate Life
10
Machine Used 5
Depreciation/ year $ 90,000
Sales Price of The
Machine n=6 - 10 $ 100,000
Capacity $ 1,000,000 Maximum
Marketing Cost 1 $ -
Marketing Cost 2 - 4 $ -
Sales Unit 400,000
Unit Price $ 1.30
Variable Cost $ 0.50
Other Cost $ 40,000
Discount Rate 0.14
Corporate Tax 0.30

Decsription Year 1 Year 2 Year 3 Year 4

Sales $ 520,000 520,000 520,000 520,000
Variable cost $ -200,000 $ -200,000 $ -200,000 $ -200,000
Marketing Cost $ - $ - $ - $ -
Fixed Cost / Annual
Cost For Development $ -40,000 $ -40,000 $ -40,000 $ -40,000
Amortization and
depre $ -90,000 $ -90,000 $ -90,000 $ -90,000
EBT $ 190,000 $ 190,000 $ 190,000 $ 190,000
Corporate Taxes $ 57,000 $ 57,000 $ 57,000 $ 57,000
Net Income $ 133,000 $ 133,000 $ 133,000 $ 133,000
Other Income $ - - - -
Defined Taxes Benefit $ - $ - $ - $ -
FCF $ 223,000 $ 223,000 $ 223,000 $ 223,000
NPV - 27,952

The marketing vice president would like some sensitivity analysis done. He asks what the NPV of the project would be if annual

Sensitivity Analysis
Current NPV Unit Price
- 27,952 1.20 1.30 1.40 1.50
300,000 - 292,299.60 - 220,204.90 - 148,110.20 - 76,015.50
350,000 - 208,189.12 - 124,078.63 - 39,968.15 44,142.33
400,000 - 124,078.63 - 27,952.37 68,173.90 164,300.17
450,000 - 39,968.15 68,173.90 176,315.95 284,458.00
500,000 44,142.33 164,300.17 284,458.00 404,615.83
550,000 128,252.82 260,426.43 392,600.05 524,773.67
600,000 212,363.30 356,552.70 500,742.10 644,931.50
650,000 296,473.78 452,678.97 608,884.15 765,089.34
700,000 380,584.27 548,805.24 717,026.20 885,247.17
 Book Value Year 5 450,000
Selling Price 100,000
Loss on Selling Machine 350,000
Tax Benefit 105,000

Year 5
520,000
$ -200,000
$ -

$ -40,000

$ -90,000
$ 190,000
$ 57,000
$ 133,000
100,000
$ 105,000
$ 428,000

e NPV of the project would be if annual unit sales vary from 300,000, 350,000,…, 700,000 and if the unit price per bar varies from $1.20,$

1.60 1.70
- 3,920.80 68,173.90
128,252.82 212,363.30
260,426.43 356,552.70
392,600.05 500,742.10
524,773.67 644,931.50
656,947.29 789,120.90
789,120.90 933,310.30
921,294.52 1,077,499.70
1,053,468.14 1,221,689.10
ce per bar varies from $1.20,$1.30,…,$1.70