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Question 8 20 Marks A snowmobile company is considering whether or not to launch a new snowmobile. It expects to sell the vehicle for R10
Question 8 20 Marks A snowmobile company is considering whether or not to launch a new snowmobile. It expects to sell the vehicle for R10 000 over five years at a rate of 100 per year. The variable costs of making one unit are R5 000, and the fixed costs are expected to be R125 000 per year. The investment would be R1 million and would be depreciated according to the straight-line method over five years with zero salvage value. The company's cost of capital is 10 percent. The corporate tax rate is 40 percent. The investment would not require any significant addition to the company's working capital requirement. Required: 8.1. What is the net present value of the investment? 8.2. How many snowmobiles would the company need to sell to breakeven (ie, for the project to have a zero net present value)? 8.3. At the breakeven level, what would be the project's discounted payback period and internal rate of return
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