Suppose you are considering an investment project that requires $800,000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected to be 65,000 units per year.
Price per unit is $63, variable cost per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS.
The tax rate is 35% and you expect a 20% return on this investment. Determine the break-even sales volume.
Calculate the cash flows of the base case over six years and its NPW. If the sales price per unit increases to $400, what is the required break-even volume?
Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurate to within;15%. What would be the NPW figures of the best-case and worst-case scenarios?