If Untel Inc

question 1

Multiple Choice

If Untel Inc. decides to manufacture a new generation of computer chips with a brief 2 year product life cycle, it expects to sell 1 million units each year. Variable cost per unit will be $75, fixed costs $5 million, and depreciation $3 million. The initial investment will be $22.91 million. Untel uses a discount rate of 10%; its marginal tax rate is 40%. To reach break-even NPV, UNTEL must sell the chips for at least ________ each.

• A) $87
• B) $105
• C) $100
• D) $1,000

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