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%. 

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?

Answer rating: 100% (QA)

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