At what price per jar would project npv equal zero

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Reference no: EM13826811

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 $3.8 million a year, and variable costs are $2.5 per jar. The product will be priced at $3.9 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 30%.

A. What is project NPV under these base-case assumptions?

B. What is NPV if variable costs turn out to be $2.8 per jar?

C. What is NPV if fixed costs turn out to be $3.3 million per year?

D. At what price per jar would project NPV equal zero?

Reference no: EM13826811

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