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How to do d and what is the answer to it? Emperor's Clothes Fashions can invest $6 million in a new plant for producing invisible
How to do d and what is the answer to it?
Emperor's Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $3 million a year, and variable costs are $2.50 per jar. The product will be priced at $3.40 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%. a. What is project NPV under these base-case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) NPV $ 3.33 million b. What is NPV if variable costs turn out to be $2.60 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) NPV $ 1.73 million c. What is NPV if fixed costs turn out to be $2.2 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) NPV $ 5.14 million d. At what price per jar would project NPV equal zero? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ 1.91 per jarStep by Step Solution
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