You Are Considering a New Product Launch

question 41

Multiple Choice

You are considering a new product launch.The project will cost $630,000,have a 5-year life,and have no salvage value; depreciation is straight-line to zero.Sales are projected at 160 units per year,price per unit will be $24,000,variable cost per unit will be $12,000,and fixed costs will be $283,000 per year.The required return is 12 percent and the relevant tax rate is 34 percent.Based on your experience,you think the unit sales,variable cost,and fixed cost projections given here are probably accurate to within ±9 percent.What is the worst case NPV?

• A)$3,417,907
• B)$2,573,269
• C)$888,618
• D)$3,102,134
• E)$3,458,020

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Definitions:

Toddler

A young child, especially one who is learning or has just learned to walk, typically between one to three years old.

Explore

To travel through or investigate an unfamiliar area or subject to learn more about it.

Strange Situation

A procedure developed by Mary Ainsworth in the 1970s to assess attachments styles in children by observing their reactions to separations and reunions with their caregiver.

Reunions

Events that bring together individuals who have been apart, often family members or friends, to reconnect and share experiences.