Question
PLEASE SHOW ALL WORK! THANKS!! You are considering a new product launch. The project will cost $780,000, have a four-year life, and have no salvage
PLEASE SHOW ALL WORK! THANKS!!
You are considering a new product launch. The project will cost $780,000, have a four-year life, and have no salvage value; depreciation is straight line to zero. Sales are projected at 180 units per year; price per unit will be $16,300, variable cost per unit will be $11,000, and fixed costs will be $535,000 per year. The required return on the project is 11 percent, and the relevant tax rate is 35 percent.
What is the base case (not best and worst case) OCF scenario for these projections and what is the base case NPV?
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