You are considering a new product launch. The project will cost $4,500,000, have a five-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 750 units per year; price per unit will be $16,500, variable cost per unit will be $12,000, and fixed costs will be $850,000 per year. The required return on the project is 11 percent, and the relevant tax rate is 25 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10 percent.

4. What is the cash break-even level of output for this project (ignoring taxes)? (5 Points)

Input area: Initial cost Price/unit Variable cost/unit Fixed costs Life Unit sales 4,500,000 Required return 16,500 Tax rate 12,000 Unit sales uncertainty 850,000 Variable cost uncertainty 5 Fixed cost uncertainty 750 11% 25% 10% 10% 10% Question 4 Cash break-even (ignoring taxes)