Question: You are considering a new product launch. The project will cost $2,250,000, have a 4-year life, and have no salvage value; depreciation is straight-line to
You are considering a new product launch. The project will cost $2,250,000, have a 4-year life, and have no salvage value; depreciation is straight-line to 0. Sales are projected at 140 units per year; price per unit will be $30,000; variable cost per unit will be $18,000; and fixed costs will be $610,000 per year. The required return on the project is 10%, and the relevant tax rate is 35%. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10%. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
