number 13

S: Corporate Finan X M MHE Reader /sh_14c4epubcfi%2F6%2F250%5Bdata-uuid-db82d3dc453c4c73a890a549632d86e9%5D1%2F%2F6%5Bdata-uuid-5c51b097efd64a7e932a3ad9779601 a A perce. To SetVerwer w Nysir quarry DUI 13. Project Analysis You are considering a new product launch. The project will cost $790,000, have a four-year life, and have no salvage value, depreciation is straight-line to zero. Sales are projected at 200 units per year, price per unit will be $17,100, variable cost per unit will be $12,600, and fixed costs will be $315,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 35 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? b. Evaluate the sensitivity of your base-case NPV to changes in fixed costs. c. What is the accounting break-even level of output for this project? 14. Project Analysis McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $725 per set and have a variable cost of $315 per set. The company has spent $150,000 for a marketing study that determined the company will sell 45,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 11,000 sets of its high-priced 1900 and have variable costs of $640. The company will also