Question: Can you please help me to answer d-2 question, thanks! You are considering a new product launch. The project will cost $1,800,000, have a 4-year
Can you please help me to answer d-2 question, thanks!
You are considering a new product launch. The project will cost $1,800,000, have a 4-year life, and have no salvage value; depreciation is straight-line to O. Sales are projected at 200 units per year; price per unit will be $21,000; variable cost per unit will be $13,500; and fixed costs will be $510,000 per year. The required return on the project is 10%, and the relevant tax rate is 35%. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within +10%. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round the final NPV answers to 2 decimal places. Omit $ sign in your response.) Scenario Base Unit Sales 200 Variable Cost $ 13,500 $ 12,150 NPV $ 739,062.22 Fixed Costs $ 510,000 $ 459,000 $ 561,000 Best 220 $ 1,765, 147.67 Worst 180 $ 14,850 $ -175,760.95 b. Evaluate the sensitivity of your base-case NPV to changes in fixed costs. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 3 decimal places. Omit $ sign in your response.) A NPV/AFC $ -2.063 c. What is the cash break-even level of output for this project (ignoring taxes)? (Round the final answers to the nearest whole unit.) Cash break-even 68.00 units d-1. What is the accounting break-even level of output for this project? (Round the final answers to the nearest whole unit.) Accounting break-even 128.00 units d-2. What is the degree of operating leverage at the accounting break-even point? (Round the final answer to 4 decimal places.) Degree of operating leverage 2.1333
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