A project currently generates sales of 118 million variable


A project currently generates sales of $11.8 million variable costs equal to 50% of sales, and fixed costs of $4 million. The firm’s tax rate is 50%. The project will last for 10 years. The discount rate is 10%.

 

If project NPV under the base-case scenario is $4 million, how much can fixed costs increase before NPV turns negative?

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Financial Accounting: A project currently generates sales of 118 million variable
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