Creativity Inc. is considering a launch of a new model of its self-driving car. The

project will cost $1,000,000 for capital spending, have a four-year life, and have no

salvage value; depreciation is straight-line to zero. Sales are projected at 250 units per

year; price per unit will be $16,000, variable cost per unit will be $10,000, and fixed

costs will be $450,000 per year. The required return on the project is 10% and the tax

rate is 20%. (Correct all answers to 4 decimal places)

a. Innovation Inc. believes sales price, unit sales, variable cost, and fixed cost

projections are accurate to within 20 percent. What are the base-case, worst-case,

and best-case scenarios NPV? (

b. What is the sensitivity of NPV to changes in unit sales?

c. What are the accounting break-even quantity, cash break-even quantity, and financial

break-even quantity (ignoring taxes)?