# Questions

## 9.9

 Chapter 9 Question 9 Input area: Sales price \$ 52.25 Variable costs \$ 14.60 Fixed costs \$ 580,000 Depreciation \$ 65,000 Tax rate 21% Discount rate 13% Initial investment \$ 455,000 Life of project 7 Output area: Complete the empty boxes below. Accounting breakeven EAC Financial breakeven

## 9.12

 Chapter 9 Question 12 Input area: Initial fixed assets \$ 385,000 Life of project (yrs) 4 Price \$ 26 Variable costs \$ 17 Fixed costs \$ 395,000 Quantity sold 73,000 Tax rate 22% Change in quantity 1,000 Output area: Complete the empty boxes below. OCF at units OCF at units Cash flow sensitivity

## 9.21

 Chapter 9 Question 21 Input area: Cash offered today \$ 50,000 Percentage of profits offered 1% Probability script is bad and is not made into a movie 90% Probability a movie is made and the movie is bad 70% Payoff if movie is good \$ 120,000,000 Output area: Complete the empty boxes below. Value if movie is good and there is a big audience Value if movie is good, there is a big audience, and the script is good Percentage of profits if movie is good, there is a big audience, and the script is good Big audience Probability = Payoff = Movie is good Probability = Make movie Script is good Movie is bad Read script Probability = Small audience Script is bad Payoff = Probability = Don’t make movie No profit The screenwriter should take

## 9.25

 Chapter 9 Question 25 Input area: Life of project 5 Discount rate 13% Tax rate 23% Pessimistic Expected Optimistic Market size 81,000 97,000 112,000 Market share 14% 17% 19% Selling price \$ 110 \$ 116 \$ 119 Variable costs per year \$ 38 \$ 36 \$ 34 Fixed costs per year \$ 615,000 \$ 575,000 \$ 550,000 Initial investment \$ 1,550,000 \$ 1,450,000 \$ 1,350,000 Output area: Complete the table below. Pessimistic Expected Optimistic Units per year Revenue Variable costs Fixed costs Depreciation EBT Tax Net income OCF NPV