Question
You are considering a new product launch. The plant and equipment will cost $760,000, have a four year life, and be depreciated on a straight
You are considering a new product launch. The plant and equipment will cost $760,000, have a four year life, and be depreciated on a straight line basis to zero salvage value. Sales are projected at 160 units per year, price per unit will be $19,000, variable cost per unit will be $13,000, and fixed costs will be $500,000 per year. The project will require an investment in inventory of $150,000 to be returned at the end of the project. The required return on the project is 15% and the tax rate is 21%. How sensitive is NPV to changes in price? What does this number mean?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started