Nexus Toy Company is looking to introduce a new line of high end toy action figures. Below are the company's forecast financial data for the product:
Price per unit ................................... $ 15
Quantity ......................................... 450, 000
Variable cost per unit ......................... $ 8
Fixed cost ...................................... $1,400,000
CCA rate ....................................... 20%
Tax rate ......................................... 30%
Capital investment ............................ $4,800,000
Cost of capital .................................. 11.5%
Calculate the project's NPV based on a 5 year life, using straight line CCA. (ignore the half year rule.) How sensitive is the NPV to a 5% reduction in price, reduction in quantity, and increase in variable cost?