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SQ Ltd. is considering the launch of taxi on rocket. The project initially cost $2,500,000 for capital spending, has a five-year life, and has no
SQ Ltd. is considering the launch of "taxi on rocket". The project initially cost $2,500,000 for capital spending, has a five-year life, and has no salvage value; depreciation is straight-line to zero. Sales are projected at 200 units per year, price per unit will be $18,000, variable cost per unit will be $12,000, and fixed costs will be $500,000 per year. The required return on the project is 10% and the tax rate is 20% a. SQ Ltd.is confident about the sales price, unit sales, variable cost, and fixed cost projections are accurate to within 10 percent. What are the base-case, worst-case, and best-case scenarios NPV? (18 Points) b. What is the sensitivity of NPV to changes in unit sales? (6 Points
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