A company is evaluating a new product proposal. The proposed product selling price is £180 per unit and the variable costs are £60 per unit. The incremental cash fixed costs for the product will be £160,000 per annum. The discounted cash flow calculation

results in a positive NPV:

Cash flow         Discount rate          Present value

    £                     £                                £

Year 0 Initial outlay (1,000,000) 1.000 (1,000,000)

Years 1–5 Annual cash flow 320,000) 3.791 1,213,120)

Year 5 Working capital released 50,000) 0.621 (1,031,050)

Net present value (1,244,170)

What is the percentage change in selling price that would result in the project having a net present value of zero?

(A) 6.7 per cent

(B) 7.5 per cent

(C) 8.9 per cent

(D) 9.6 per cent

(E) 10.5 per cent