You are considering a new product launch. The project will cost $$1,400,000,$ have a four$-$year

life and have no salvage value; depreciation is straight$-$line to zero. Sales are projected at $180$

units per year; price per unit will be $$16,000.$ Variable cost per unit will be $$9,800$ and fixed

costs will be $$430,000$ per year. The required return on the project is $12\%$ and relevant tax rate

is $35\%.$

$5.$ Based on your experience, you think the unit sales, variable cost and fixed cost

projections given here are probably accurate to within a $+/-10\%$ spread. 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?

$6.$ Evaluate the sensitivity of your base$-$case NPV to changes in fixed costs.

$7.$ What is the cash break$-$even level of output for this project?

$8.$ What is the accounting break$-$even level of output for this project? What is the degree

of operating leverage at the accounting break$-$even point?