Question: 2-1 Fast Choice Inc. is evaluating a new project which requires an initial investment in a new machine of CAD590146. The machine will have a

2-1 Fast Choice Inc. is evaluating a new project which requires an initial investment in a new machine of CAD590146. The machine will have a usual life of 5 years and will be depreciated with a CCA rate of 20%, there is not salvage value and the present value of the CCA tax shield is 75993.51717524. Revenues are expected to yield 4968 units for an expected sales price of CAD1709. Variable cost are estimated at CAD1107 per unit and fix cost at CAD496816. The firm has a marginal tax rate of 21% and an effective tax rate of 16%. Cost of capital for the firm are 11%. At the end of the project assets will remain in the CCA class and will have no additional tax implications.

A) What is minimum number of units sold to have a financial break even for the project?

B) By how much will the NPV of the project change for each CAD increase in fixed costs?

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