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Emperor's Clothes Fashions can invest $5.06 million in a new plant for producing invisible makeup. The plant has an expected life of five years, and
Emperor's Clothes Fashions can invest $5.06 million in a new plant for producing invisible makeup. The plant has an expected life of five years, and expected sales are 6.06 million jars of makeup a year. Fixed costs are $2.15 million a year, and variable costs are $1.15 per jar. The product will be priced at $2.15 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%.
- What is project NPV under these base-case assumptions?(Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to the nearest whole dollar amount.)
- What is NPV if variable costs turn out to be $1.35 per jar?(Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to the nearest whole dollar amount.)
- What is NPV if fixed costs turn out to be $1.65 million per year?(Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to the nearest whole dollar amount.)
- At what price per jar would project NPV equal zero?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
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