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Use the details provided below to answer all three questions. bose has spent $100,000 developing a prototype of a new type of wireless earbuds. They
Use the details provided below to answer all three questions. bose has spent $100,000 developing a prototype of a new type of wireless earbuds. They plan on selling the earbuds for $80 a set and expect to sell 10.000 sets for the next 4 years after which they will need to replace them with a new design. The Cost of Goods Sold for each set is $50. Ears combines all the fixed costs of their production facility an allocates these costs based on Sales. This project has received an allocation of $150,000 of these costs. This project will generate $60,000 in new fixed costs. The will need initial NOWC of $80,000 to start the project the project will not need any NOWC when completed in 4 years. The project will require $600,000 of new Equipment which will be depreciated on a 4 year straight line basis. At the end of the project this equipment will be worthless. The OCC = 10% and the Tax Rate is 20%. 1. Calculate the Start Up Costs and the NOPAT and Free Cash Flow generated in each of the four years of the project. 2.Calculate the NPV of the project. 3. Calculate the dollar value of annual earbud sales required to reach Economic Break Even
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