Question: You are considering a new product launch. The project will cost $840,000, have a 4-year life, and have no salvage value; depreciation is straight-line to

You are considering a new product launch. The project will cost $840,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 230 units per year; price per unit will be $16,450, variable cost per unit will be $11,400, and fixed costs will be $565,000 per year. The required return on the project is 10 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 10 percent.

A) What are the best-case and worst-case values for each of the projections?

You are considering a new product launch. The project will cost

B) What are the best-case and worst-case OCFs and NPVs with these projections?

$840,000, have a 4-year life, and have no salvage value; depreciation is

C)What are the base-case OCF and NPV?

straight-line to zero. Sales are projected at 230 units per year; price

D) What are the OCF and NPV with fixed costs of $575,000 per year?

per unit will be $16,450, variable cost per unit will be $11,400,

E)What is the sensitivity of your base-case NPV to changes in fixed costs?

and fixed costs will be $565,000 per year. The required return on

Note: someone please help

Scenario Unit Sales Variable Costs Fixed Costs 230 $ Base Best 11,400 565,000 Worst OCF NPV Best-case Worst-case Base-case OCF Base-case NPV OCF NPV For every dollar FC increases, NPV falls by

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