. Investment Returns and Sales Volume. D. D. Ward, whose uncle whispered "plastics" into his ear soon after he graduated from college years ago, founded Plastic Opportunities, Inc. Ward is considering an investment of \(\$ 2,000,000\) in a new product line. Depreciation of \(\$ 200,000\) is to be deducted in each of the next ten years. Salvage value is estimated at zero. A selling price of \(\$ 50\) per unit is decided upon; unit variable cost is \(\$ 30\). The sales division believes that a sales estimate of 50,000 units per year is realistic. His controller states that a solid market exists for only 20,000 units a year. Projects must meet a minimum rate-of-return requirement of 15 percent. Income tax is estimated at 40 percent of income before tax.

Required:

1. Evaluate the project using each of the sales volume estimates. Use the NPV method.

2. At what volume will the project earn exactly a 15 percent return?