Question: please show how to do the math by hand Problem 10-8 Sensitivity Analysis (L03) Emperor's Clothes Fashions can invest $5 million in a new plant
Problem 10-8 Sensitivity Analysis (L03) Emperor's Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 6 million jars of makeup a year, Fixed costs are $2.8 million a year, and variable costs are $1.40 per jar. The product will be priced at $3.00 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero, The opportunity cost of capital is 14%, and the tax rate is 30%. a. What is project NPV under these base case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is NPV If variable costs turn out to be $2.10 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) c. What Is NPV if fixed costs turn out to be $26 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) d. At what price per jar would project NPV equal zero? (Enter your answer in dollars nor in millions. Do not round Intermediate calculations. Round your answer to 2 decimal places.) a NPV b NPV NPV d. Price million million million perjar
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