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Develop the new product

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You are considering a new product launch. Thus far, you have determined that an OCF of SAR 1.5 m will result in a zero net present value for the project, which is the minimum requirement for project acceptance. You have computed its fixed costs to be SAR 550 per unit for annual sales of 1,800 units. The price per unit will be $2,400 and variable cost per unit will be $1,200. You feel that it can realistically capture 2.25 percent of the 110,000 unit market for this product. The tax rate is 34 percent and the required rate of return is 11 percent. Should the company develop the new product? Why or why not?

Reference no: EM132546360

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