1) Unique’s Clothes Fashions can invest= $6 million in the new plant for manufacturing invisible makeup. Plant has the expected life of five years, and expected sales are= 7 million jars of makeup a year. Fixed costs are= $2.2 million a year, and variable costs are= $1.8 per jar. Product will be worth at= $2.6 per jar. Plant will be declined straight-line over five years to salvage value of zero. Opportunity cost of capital is= 10%, and tax rate is= 30%.
a) Determine the project NPV under these base-case suppositions?
b) Find out NPV if variable costs turn out to be= $2 per jar?
c) Compute the NPV if fixed costs turn out to be= $1.7 million per year?
d) At what price per jar would project NPV equal 0?