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(30 marks) You have developed a new hair growth drug that is expected to revolutionize the hair growth industry. Your product launch is expected to
(30 marks) You have developed a new hair growth drug that is expected to revolutionize the hair growth industry. Your product launch is expected to cost 81.9M. have a four-year life. and have a salvage value of $500000. Your investment falls into class 14 and has a C CA rate of 25%. Sales are projected to start at 180000 units per year and grow by 15% per year; price per unit will be $16: variable cost per unit will be $10. and fixed costs will be 8450.000 per year. The price. and variable costs are both expected to grow by 3%: per year. Net working capital is expected to be 8200.000 per year. The required return 011 the project is 15% and the relevant tax rate is 20%. a. What is your expected NPV and IR for the project? Should you accept or reject this proj ect'.' ( 12 marks) b. What is the base. best. and worst-case scenario NPV's and IRRs if you think your unit sales. price. variable costs. and their respective growth rates values are accurate within 15%? (6 marks) c. Evaluate the sensitivity of your NPV and IR to changes in unit sales. price. variable costs. and their respective growth rates using :109'6 and :15%. Which variables show the most sensitivity\"? ( 1 3 marks)
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