4. You are considering a new product launch. The project will cost $1,800,000, have a three-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 210 units per year; price per unit will be $15,000, variable cost per unit will be $9,500, and fixed costs will be $550,000 per year. The required return on the project is 14%, and the relevant tax rate is 35%. What is the sensitivity of NPV to FC?

4. You are considering a new product launch. The project will cost $1,800,000, have a three-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 210 units per year; price per unit will be $15,000, variable cost per unit will be $9,500, and fixed costs will be $550,000 per year. The required return on the project is 14%, and the relevant tax rate is 35%. What is the sensitivity of NPV to FC?

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Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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