Now, use the worst-case scenario from the prior problem to p…

Now, use the worst-case scenario from the prior problem to perform a sensitivity analysis where the initial project investment is twice the expected level. Compute and interpret the degree of operating leverage under this worst-case scenario sensitivity analysis. Recall the following details: Fex Ed is considering a new product launch. The project will cost $2,000,000, have a 5-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 500 units per year, price per unit will be $7,500, variable cost per unit will be $6,000, and fixed costs will be $225,000 per year. The relevant tax rate is 21 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ± 5%. 

Fex Ed is considering a new product launch. The project will…

Fex Ed is considering a new product launch. The project will cost $2,000,000, have a 5-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 500 units per year, price per unit will be $7,500, variable cost per unit will be $6,000, and fixed costs will be $225,000 per year. The relevant tax rate is 21 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ± 5%. For the worst case, what is cash breakeven sales quantity level (ignoring taxes)?

The choice of which segment(s) to focus on for acquiring cus…

The choice of which segment(s) to focus on for acquiring customers has a profound and long-lasting effect on growth and success. Which segment, A or B, can you most easily make the financial case for pursuing, if segment A and segment B can be described simplistically as given below?  Use this information to make the case for your chosen segment.Average number of hours of sales efforts per acquired customer for segments A and B are 10 and 40, respectively, where the hourly cost of such efforts is $300. The initial purchase yields contribution profits of $1000 and $4000, respectively, for segments A and B, followed by recurring, monthly contribution profits of $300 and $600 thereafter. Segment A’s monthly churn rate is .04, compared to B’s .025. For simplicity assume the cost of capital is zero.