Your run a toy company that is considering updating your electric tricycle line. The upgrades will cost $30 million and will add a fixed cost of $1 million per year, but will decrease your variable costs by $40 per unit. This project will be good for 5 years. Assume 5-year straight-line depreciation, a 40% tax rate, and a 10% cost of capital.
What is the NPV of this project if you sell 300,000 units per year?
What is the break-even number of units you must sell in order to make this project profitable?