What is accounting break-even level of output for project

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Reference no: EM13275646

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. Requirement 1: Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. (a) What are the best-case and worst-case values for this project? Scenario Unit sales Variable cost Fixed costs Base 240 $ 19,500 $ 830,000 Best $ $ Worst $ $ (b) What is the base-case NPV? (c) What are the best-case and worst-case scenarios? Requirement 2: Calculate the sensitivity of your base-case NPV to changes in fixed costs Requirement 3: What is the accounting break-even level of output for this project?

Reference no: EM13275646

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