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Carlino, Inc can invest $10 million in a new plant for producing invisible makeup. The plant has an expected life of 4 years, and expected
Carlino, Inc can invest $10 million in a new plant for producing invisible makeup. The plant has an expected life of 4 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $4 million a year, and variable costs are $2 per jar. The product will be priced at $4 per jar. The plant will be depreciated straight-line over 4 years to a salvage value of zero. The opportunity cost of capital is 15 percent, and the tax rate is 40 percent. What is project NPV if variable cost turn out to be $2.5 per year?
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