Consider the case of introducing a new product to the market with an initial investment of $350,000 that will be depreciating down to zero in 10 years with no salvage value. Price per unit is $50 and variable cost per unit is $18. Fixed costs are $8,000 per year. Market rate is 10% and tax rate is 20%.
a) What is the financial break-even quantity?
b) Calculate the net present value of the project.