At what price per jar would project npv equal zero

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Emperor's Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $2.3 million a year, and variable costs are $1.30 per jar. The product will be priced at $2.20 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 10%, and the tax rate is 40%.

Problem 1: What is project NPV under these base-case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Problem 2: What is NPV if variable costs turn out to be $1.50 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Problem 3: What is NPV if fixed costs turn out to be $2 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Problem 4: At what price per jar would project NPV equal zero? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM132906723

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