K-Too Corporation is currently evaluating a project that costs $500,000, has a five-year life, and has no salvage value. Depreciation is straight-line to zero. The required return is 15%, and the tax rate is 36%. Sales are projected at 5,000 units per year. Price per unit is $300, variable cost per unit is $150, and the fixed costs are $9,000 per year. Suppose that you think that the unit sales, price, variable cost, and fixed cost projections given here are accurate only to within +15 percent.

1. What are the base, best and worst-case scenario NPVs? (12 marks)

2. Calculate the accounting, cash, and financial break-even for K-Too Corporation, ignoring taxes. (4 marks)