Precision Medical Instruments is evaluating the following investment relating to a new line of blood pressure gauges

Question:

Precision Medical Instruments is evaluating the following investment relating to a new line of blood pressure gauges for use in hospitals and homes.
Initial outlay............................................................ $22,250,000
Useful life ....................................................................15 years
at the end of useful life........................................ zero
Unit variable cost................................................................. $85
Annual fixed costs (excluding depreciation)........................... $400,000
Required rate of return.......................................................... 12%
Corporate tax rate............................................................... 25%
Expected annual sales .................................................80,000 units
Required:
Assume that the company wishes to maintain a stable pricing policy over the entire 15-year horizon. Using NPV analysis, what is the minimum price per unit that the company needs to sell this product in order for the investment to be justifiable? (Precision uses straight-line depreciation for tax purposes)
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...