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13. Project Analysis You are considering a new product launch. The project will cost $760,000, have...

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13. Project Analysis You are considering a new product launch.The project will cost $760,000, have a four-year life, and have nosalvage value; depreciation is straightline to zero. Sales areprojected at 420 units per year; price per unit will be $17,200;variable cost per unit will be $14,300; and fixed costs will be$640,000 per year. The required return on the project is 15percent, and the relevant tax rate is 35 percent. a. Based on yourexperience, you think the unit sales, variable cost, and fixed costprojections given here are probably accurate to within ±10 percent.What are the upper and lower bounds for these projections? What isthe base-case NPV? What are the best case and worst-case scenarios?b. Evaluate the sensitivity of your base-case NPV to changes infixed costs. c. What is the accounting break-even level of outputfor this project?

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3.7 Ratings (655 Votes)
0 1 2 3 4 Investment 760000 Sales 7224000 7224000 7224000 7224000 VC 6006000 6006000 6006000 6006000 FC 640000 640000 640000 640000 Depreciation 190000 190000    See Answer
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