a very profitable company is considering a new product launch. It will cost $12,000,000, have a 10
Question:
a very profitable company is considering a new product launch. It will cost $12,000,000, have a 10 year life, depreciation is straight line and salvage value is zero. Sales are projected at 1000 units per year, price per unit will be $5,000, variable cost will be $2,000 per unit, and fixed costs are $1,000,000 per year. The required rate of return on the project is 12% and the tax rate is 40%.
1)ABE believes that unit sales can change by+10%, price per unit by+20%, variable cost per unit by+15%, and fixed cost by+5%. What is the base case NPV? What are the best case and worst case scenarios NPVs?
2)Using the relevant base case information determine the
Cash break-even level of output?
Accounting break-even level of output?
Output level at which NPV is zero?
Price at which NPV is zero?