You are considering a new product launch. The project will cost $850,000, have a 4-year...
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You are considering a new product launch. The project will cost $850,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 510 units per year; price per unit will be $18,700, variable cost per unit will be $15,400, and fixed costs will be $875,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 23 percent. a. The unit sales, variable cost, and fixed cost projections given above are probably accurate to within +10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your NPV answers to 2 decimal places, e.g., 32.16.) Scenario Upper bound Lower bound Unit sales units Variable cost per unit Fixed costs
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