A project has a 7 year life and costs $400,000. Depreciation is straight line to zero over the life of the
project and there is no salvage value. The tax rate is 30% and a 12% return on this project. Sales are expected to be 75,000 units per year.
If the fixed cost per unit is $600,000 per year, the variable cost is $40 per unit and the revenue for each unit is $50:
a) What is the base-case cash flow
b) What is the NPV
Hint: Question 5 is related to information provided in Chapter 11.