Question
We are evaluating a project that costs $1,675,000, has a six year life, and has no salvage value. Assume that depreciation is straight line to
We are evaluating a project that costs $1,675,000, has a six year life, and has no salvage value. Assume that depreciation is straight line to zero over the life of the project. Sales are projected as 91,000 units per year, price is $35.95 per unit, variable cost is $21.4 per unit, fixed costs are $775,000 per year. Tax rate is 35% and discount rate is 11%.
1) calculate base-case profit, profit with a 100-unit increase or 100-unit decrease, and break-even units
2) how much is base-case NPV? What is changes on NPV with a 100-unit increase in sales?
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