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What must the market price be to generate a positive NPV

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Reference no: EM132966933

Question - A company is contemplating launching a new product. They have already used $400.000 and have to make a decision to commit to the remainder of $600.000 in year 0.

The investment will be depreciated over a period of 3 years. Tax is 25%. The cost per unit is estimated to be $100. The market price is unknown, but they estimate to sell 10,000 units every year. The market price is assumed to be equal every year.

What must the market price be to generate a positive NPV if the cost of capital is 10%?

Reference no: EM132966933

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