What are the best-case and worst-case scenarios

Reference no: EM13275686

You are considering a new product launch. The project will cost $960,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 240 units per year; price per unit will be $25,000; variable cost per unit will be $19,500; and fixed costs will be $830,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 35 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the best-case and worst-case values for this project? What are the best-case and worst-case scenarios? Calculate the sensitivity of your base-case NPV to changes in fixed costs. What is the accounting break-even level of output for this project?

Reference no: EM13275686

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