Question: You are considering a new product launch. The project will cost $998,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 340 units per year; price per unit will be $19,600, variable cost per unit will be $16,100, and fixed costs will be $332,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 35 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the best-case and worst-case NPVs with these projections:
What is the Worst NPV?
What is the Best NPV?
What is the base-case NPV?
What is the sensitivity of your base-case NPV to changes in fixed costs?
For every dollar FC increases, NPV falls by $?