Posting in General Account Marketing has forecast that at almost any reasonable price annualdemand for a new product will be for 8000 units. Production of thisproduct will generate $12000 per year in fixed costs, with a variablecost per unit of $5.25.At what minimum price would producing/selling this item become aprofitable endeavor?A) Not in excess of $4.25B) In excess of $4.25 but not in excess of $6.50C) In excess of $6.75 but not in excess of $8.75D) In excess of $8.75 but not in excess of $11E) In excess of $11

**Step 1: Define the total cost function**Total cost = Fixed cost + (Variable cost per unit ×…

Answered: Marketing has forecast that at almost…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 4P

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The most likely outcomes for a particular project are estimated as follows: Unit price: Variable cost: Fixed cost: Expected sales: $ 50 $ 30 $ 490,000 48,000 units per year However, you recognize that some of these estimates are subject to error. Suppose each variable turns out to be either 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $2.3 million, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 21%, and the required rate of return is 10%. a. NPV b. NPV a. What is project's NPV in the best-case scenario, that is, assuming all variables take on the best possible value? b. What is project's NPV in the worst-case scenario? Note: For all the requirements, a negative amount should be indicated by a minus sign. Enter your answers in dollars, not in millions. Do not round intermediate calculations. Round your answers to the nearest dollar amount. 4
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