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How to do d and what is the answer to it? How to do d and what is the answer to it? Emperor's Clothes Fashions
How to do d and what is the answer to it?
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-ine 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 08 per jarStep by Step Solution
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