You are considering a new product launch. The project will cost $2,000,000, have a four-year...
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Accounting
You are considering a new product launch. The project will cost $2,000,000, 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 $17,900, variable cost per unit will be $11,900, and fixed costs will be $580,000 per year. The required return on the project is 10 percent, and the relevant tax rate is 22 percent. Evaluate the sensitivity of your base-case NPV to changes in fixed costs
What is the case break-even level of output for this project (ignoring taxes)
What is the accounting break-even level of output for this project?
What is the degree of operating leverage at the accounting break-even point?
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