You are considering a new product launch. The project will cost $1,950,000, have a four-year life, and have a market salvage value of $20,000; depreciation is straight-line to zero. Sales are projected at 210 units per year; price per unit will be $17,500, variable cost per unit will be $10,600, and fixed costs will be $560,000 per year. The required return on the project is 12%, and the relevant tax rate is 21%.

a. Based on your experience, you think the unit sales, variable cost, and fixed cost projects given here are probably accurate to within .

What are the upper and lower bounds for these projections?

What is the base-case NPV?

What are NPVs for the best-case and worst-case scenarios?

Evaluate the sensitivity of your base-case NPV to changes in fixed costs (i.e. NPV/FC).