Fin622 assignment Solution 2012

Fin622 assignment Solution 2012


Sale Price per unit = 480
Direct Material per unit = 120
Direct Labor per unit = 125
Fixed cost per unit = 115
Less Opportunity cost = -10
Total cost = 350
Contribution margin 130 per unit
Total contribution per year = 130 x 10000 = 1,300,000

B)
1300000/1.18+1300000/(1.18^2)+1300000/(1.18^3)+1300000/(1.18^4)-2290000 = 1,207,080.35

C) NPV is positive and the product is feasible.

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