Emperors Clothes Fashions can invest $6 million in a new plant for producing invisible makeup....
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Emperors Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $1.8 million a year, and variable costs are $2.50 per jar. The product will be priced at $3.40 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 12%, and the tax rate is 40%.
What is NPV if fixed costs turn out to be $1.6 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
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