Effect on project npv, What is the effect on project NPV,

Effect on project npv

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Reference no: EM13754685

A project currently generates sales of $11.5 million, variable costs equal to 40% of sales, and fixed costs of $3.4 million. The firm's tax rate is 40%.

The project will last for 10 years. The discount rate is 12%.

a-1. What is the effect on project NPV, if sales increase from $11.5 million to $13.5 million?

a-2. What is the effect on project NPV, if variable costs increase to 60% of sales?

b. If project NPV under the base-case scenario is $3.4 million, how much can fixed costs increase before NPV turns negative?

c. How much can fixed costs increase before accounting profits turn negative?

Reference no: EM13754685

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