How many sales units can be lost per year

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Reference no: EM132809084

Bell Corporation has just conducted a net present value (NPV) analysis for a project involving purchasing a machine that would permit making and selling a new bookcase product called Rack-it. The analysis presumed this new product would be made and sold over the next four years. Using a tax rate of 40%, a required rate of return (i) of 14%, an assumed sale of 8,000 units of Rack-it per year, an assumed selling price of $115 per unit, an assumed variable cost of $15 per unit, and assumptions about increased annual cash fixed costs (you do NOT need to know this dollar amount to solve this problem), the project has an estimated NPV of a positive $130,000.

Porblem 1: Marketing is not sure that the annual sales units of 8,000 estimated and used to conduct the NPV analysis is realistic; thus, the sales units could end up being lower per year. How many sales units can be lost per year (from the originally estimated 8,000 units) before the project becomes unattractive? Round to the nearest whole unit.

Reference no: EM132809084

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