A company sells Gizmos to consumers at a price of $95 per unit. The costs to produceGizmos
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Question:
A company sells Gizmos to consumers at a price of $95 per unit. The costs to produceGizmos is $37 per unit. The company will sell 16,000 Gizmosto consumers each year. The fixed costs incurred each year will be $190,000. There is an initial investment to produce the goods of $3,500,000 which will be depreciated straight line over 12 year life of the investmentto a salvage value of $0. The opportunity cost of capital is 14% and the tax rate is 25%.
a) Using an operating cash flow of 626,416.67 each year, what is the NPV of this project?
b) Based on the NPV, should the company accept or reject this project?
b) Find the net present value break-even level of units sold. (Round your answer to the nearest whole unit)
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