Emperors Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $2.3 million a year, and variable costs are $1.30 per jar. The product will be priced at $2.20 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 10%, and the tax rate is 40%.

1. What is project NPV under these base-case assumptions?

2.What is NPV if variable costs turn out to be $1.50 per jar?

3. What is NPV if fixed costs turn out to be $2 million per year?

4. At what price per jar would project NPV equal zero?