Camnet Industry is considering introducing a new line of higher end produces.  Below are the company's forecast of financial data for the new products.

Price per unit:                    $15

Quantity:                             300,000

 Variable Cost per unit:     $8

Fixed Costs:                       $1,750,000

CCA rate:                            20%

Capital Investment:            $3,750,000

 WACC:                               13.6%

 

Calculate the project's NPV based on a 5-year life, using straight-line CCA (ignore the half year rule).  

a. How sensitive is NPV to a 4% reduction in price?

b. How sensitive is NPV to a 6% reduction in quantity sold?

c. How sensitive is NPV to a 5% increase in variable costs?