X expects to sell 300,000 units of a new product. The variable cost per unit...
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X expects to sell 300,000 units of a new product. The variable cost per unit is $8, and the annual fixed costs are $1,200,500. The straight-line annual depreciation expense is $400,000 leaving the fixed asset worthless at the end of the project in six years. The firms payout ratio is 60% and the expected addition to retained earnings is $157,842 per year. Also required is $600,500 of net working capital for the life of the project. The tax rate is 21 percent, and the required rate of return is 12 percent.
What would be the percentage change in the NPV due to a 1% decrease in the unit price?
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