Question: Need help solving. You are considering a new product launch. The project will cost $1.675 million, have a four-year life, and have no salvage value;
You are considering a new product launch. The project will cost $1.675 million, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 195 units per year, price per unit will be $16,300, variable cost per unit will be $9,400, and fixed costs will be $550,000 per year. The required return on the project is 12 percent, and 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 \pm 10 percent. a. What are the best and worst case NPVs with these projections? Note: A negotive answer should be indicated by a minus sign. Do not round intermediate calculations ond round your onswers to 2 decimal places, e.g., 32.16. b. What is the base-case NPV? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 3216. c. What is the sensitivity of the NPV to changes in fixed costs? Note: A negotive answer should be indicoted by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal ploces, e.9., 32.16
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