Question
The management team of a company are determining the sensitivity analysis of a project. In the first scenario, the project has the following information: depreciation
The management team of a company are determining the sensitivity analysis of a project. In the first scenario, the project has the following information: depreciation life = 10; project cost = $2,000,000; unit sales = 50,000; unit Price = $300; unit variable cost = $210; fixed costs = $400,000; tax rate 34%; rate of return = 10%. In the second scenario, it was determined that if the price falls to $285 per unit, then sales will increase to 75,000 units, while all other variables would remain the same. Given this information, determine the NPV of both scenarios.
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