Question
You are considering a new product launch. The project will cost $830,000, 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 $830,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 470 units per year, price per unit will be $18,500, variable cost per unit will be $15,200, and fixed costs will be $845,000 per year. The required return on the project is 10 percent, and the relevant tax rate is 21 percent. |
b. | Calculate the sensitivity of your base-case NPV to changes in fixed costs. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) |
c. What is the accounting break-even level of output for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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