You are considering a new product launch. The plant and equipment will cost $1.9 million, have a five year life, and be depreciated on a straight line basis to zero salvage value. Sales are projected at 15,500 units per year, price per unit will be $153, variable cost per unit will be $67, and fixed costs will be $900,000 per year. The project will require an investment in inventory of $150,000 to be returned at the end of the project. The require return on the project is 12% and the tax rate is 22%. Based on your knowledge, you feel that the price and ficed costs are accurate to within +/- 15% and units per year and variable costs are accurate to within +/- 10%. Show a table with the base case, best case and worst case values for the project. Also, calculate the NPV and IRR for the worst-case scenario.

You are considering a new product launch. The plant and equipment will cost $1.9 million, have a five year life, and be depreciated on a straight line basis to zero salvage value. Sales are projected at 15,500 units per year, price per unit will be $153, variable cost per unit will be $67, and fixed costs will be $900,000 per year. The project will require an investment in inventory of $150,000 to be returned at the end of the project. The require return on the project is 12% and the tax rate is 22%. Based on your knowledge, you feel that the price and ficed costs are accurate to within +/- 15% and units per year and variable costs are accurate to within +/- 10%. Show a table with the base case, best case and worst case values for the project. Also, calculate the NPV and IRR for the worst-case scenario.

Quantity per year

Price/unit

Variable costs/unit

Fixed costs