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1 3 . Project Analysis You are considering a new product launch. The project will cost $ 1 . 6 7 5 million, have a
Project Analysis You are considering a new product launch. The project will cost $ million, have a fouryear life, and have no salvage value; depreciation is straightline to zero. Sales are projected at units per year; price per unit will be $; variable cost per unit will be $; and fixed costs will be $ per year. The required return on the proiect is percent and the relevant tax rate is percent.
a Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within # percent. What are the upper and lower bounds for these projections? What is the basecase NPV What are the bestcase and worstcase scenarios?
b Evaluate the sensitivity of your basecase NPV to changes in fixed costs.
c What is the accounting breakeven level of output for this project?
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