#6. Emperors clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has expected life of five years, and expected sales are 6 million jars of makeup a year. Fixed costs are $2 million a year, and variable costs are $1 per jar. The product will be priced at $2 per jar. The plant will be depreciated straight-line over five years to a salvage value of zero. The opportunity cost of capital is 10%, and the tax rate is 40%.

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At what price per jar would project NPV equal zero? (Hint: find the OCF that makes NPV=0) 75