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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?

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