4. You are considering a new product launch. The project will cost $1,022,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 400 units per year; price per unit will be $20,200, variable cost per unit will be $16,700, and fixed costs will be $338,000 per year. The required return on the project is 14 percent, and the relevant tax rate is 35 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10 percent. Required: (a) What are the best and worst case values for each of the projections? Variable costs $16,700 Scenario Base Best Worst Best-case Worst-case Unit sales 400 (b) What are the best- and worst-case OCFS and NPVs with these projections? OCF NPV OCF $ $ Fixed costs $338,000 (c) What is the base-case OCF and NPV? OCF base $ $ NPV base (d) What is the OCF and NPV with fixed costs of $348,000 per year? $ $ (e) What is the sensitivity of the NPV to changes in fixed costs? For every dollar FC increase, NPV falls by $. NPV $ $

4. You are considering a new product launch. The project will cost $1,022,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 400 units per year; price per unit will be $20,200, variable cost per unit will be $16,700, and fixed costs will be $338,000 per year. The required return on the project is 14 percent, and the relevant tax rate is 35 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within \pm 10 percent. Required: (a) What are the best and worst case values for each of the projections? (b) What are the best- and worst-case OCFs and NPVs with these projections? (c) What is the base-case OCF and NPV? OCF, NPV $ (d) What is the OCF and NPV with fixed costs of $348,000 per year