Question

You are considering a new product launch. The project will cost $2,150,000, have a four year life, and have no salvage value, depreciation is straight-line to zero. Sales are projected at 150 units per year, price per unit will be $28,000, variable cost per unit will be $17,000, and fixed costs will be $580,000 per year. The required retum on the project is 12 percent, and the relevant tax rate is 34 percent a. The unit sales, variable cost, and fixed cost projections given above are probably accurate to within 10 percent What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your NPV answers to 2 decimal places, e.g.32.16.) Unit sales Variable cost per unit Ficed costs units Base-case Best-case Worst-case b. Calculate the sensitivity of your base-case NPV to changes in fixed costs. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) ANPVIAFC calculations and round your answer to the nearest whole number, e.g,32. c. What is the accounting break-even level of output for this project? (Do not round intermediate Accounting break-even its Type here to search

Answer 1