Question: Fed Ex is considering a new product launch. The project will cost $ 2 , 0 0 0 , 0 0 0 , have a

Fed Ex is considering a new product launch. The project will cost $2,000,000, have a 5-
year life, and have no salvage value; depreciation is straight-line to zero. Sales are
projected at 500 units per year, price per unit will be $7,500, variable cost per unit will be
$6,000, and fixed costs will be $225,000 per year. The relevant tax rate is 21 percent.
Based on your experience, you think the unit sales, variable cost, and fixed cost
projections given here are probably accurate to within 5%. For the worst case, what is
cash breakeven sales levels (ignoring taxes)?

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