Question
You are considering a new product launch. The project will have an initial cost for fixed assets of 1150000, a three-year life, and no salvage
You are considering a new product launch. The project will have an initial cost for fixed assets of 1150000, a three-year life, and no salvage value; depreciation is straight-line to zero. Sales are projected at 230 units per year, price per unit will be 7500, variable cost per unit will be $3,900, and fixed cost will be $122,000 per year. The required return is 12 percent and the relevant tax rate is 21 percent. Based on your experience, you think the unit sales and price are accurate within a -/+ percent range while costs may vary by -/+3 percent. What is the worst-case NPV?
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