Answer the following questions Question 1: Shortly explain the sensitivity and scenario analysis? Question 2: It is believed that smaller companies are more risky than the large firms. Why? Question 3: You purchase equipment for 90,000 and it costs 10,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for 15,000 when you are done with it in 5 years. The company's marginal tax rate is 30% What is the depreciation expense each year, and book value and the after-tax salvage in year 5 if the company use straight-line depreciation? Question 4: Your firm pays 5000 per month in fixed costs. You also pay 12 per unit to produce your product.Assume that you produce 1000 A) What is your total cost? B) What is your average cost? C) What is your marginal cost?

Question

Answer the following questions Question 1: Shortly explain the sensitivity and scenario analysis? Question 2: It is believed that smaller companies are more risky than the large firms. Why? Question 3: You purchase equipment for 90,000 and it costs 10,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for 15,000 when you are done with it in 5 years. The company's marginal tax rate is 30% What is the depreciation expense each year, and book value and the after-tax salvage in year 5 if the company use straight-line depreciation? Question 4: Your firm pays 5000 per month in fixed costs. You also pay 12 per unit to produce your product.Assume that you produce 1000 A) What is your total cost? B) What is your average cost? C) What is your marginal cost?

Answer 1

Question 1: Sensitivity analysis is a technique used to determine how different values of an independent variable impact a particular dependent variable under a given set of assumptions. It is used to predict the outcome of a decision given a certain range of variables. Scenario analysis, on the other hand, is a process of evaluating and comparing different possible future events or scenarios. It is used to understand the potential outcomes of different scenarios and to make informed decisions.Question 2: Smaller companies are generally considered more risky than large firms due to several reasons. Firstly, they may have limited resources and less experience in managing operations, which can lead to higher chances of failure. Secondly, they may have less established customer bases and supplier relationships, making it harder to generate consistent revenue. Lastly, they may have less access to capital and financing options, which can limit their ability to invest in growth opportunities.Question 3:To calculate the depreciation expense each year, we need to determine the total cost of the equipment and divide it by the useful life of the equipment.Total cost = Purchase price + Installation cost =

10,000 =

100,000 / 5 =

100,000 - (

0After-tax salvage value in year 5 = Book value at the end of year 5 * (1 - Tax rate) =

0Question 4:A) Total cost = Fixed cost per month * Number of months + Variable cost per unit * Number of units = (

12 * 1000) =

12000 =

17000 / 1000 =

12

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