What is project npv under these base-case assumptions

Assignment Help Financial Management

Reference no: EM131510702

Emperor’s Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $2.4 million a year, and variable costs are $1.90 per jar. The product will be priced at $2.80 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 14%, and the tax rate is 35%.

a. What is project NPV under these base-case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) NPV $ million

b. What is NPV if variable costs turn out to be $2.00 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) NPV $ million

c. What is NPV if fixed costs turn out to be $1.8 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) NPV $ million

d. At what price per jar would project NPV equal zero? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ per jar

Reference no: EM131510702

Questions Cloud

What is the rate of return on equity investment for buyer : What is the rate of return on the equity investment for a buyer who pays cash to purchase this investment property?

What is the equivalent annual cost of the tool : If the discount rate is 10% and the lathe will only last for 5 years, what is the equivalent annual cost of the tool?

The current interest rate for discounting this perpetuity : Suppose that you have a liability of $1000 per year in perpetuity and the current interest rate for discounting this perpetuity is 8%.

Common stockholder expected return and cost of debt : If you purchased 125 shares of common stock that pays end-of-year dividend of $3, what is your expected rate of return if you purchased stock for $30 per share

What is project npv under these base-case assumptions : Emperor’s Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. What is project NPV under these base-case assumptions?

What is the maturity risk premium for the two-year security : What is the maturity risk premium for the 2-year security? %

What is yield on four year security with no maturity-default : what is the yield on a 4-year security with no maturity, default, or liquidity risk?

Coin collection contains-how much will collection be worth : how much will your collection be worth when you retire in 2050 if they appreciate at 3.5%?

Indicate effect on periods fcff and fcfe of change in items : Indicate the effect on this period's FCFF and FCFE of a change in each of the items listed below.

User Account

All Pages