Tom is evaluating a project that costs $3,500,000, has a five-year life, and has no salvage value.
Question:
Tom is evaluating a project that costs $3,500,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 125,000 units per year, price per unit is $65, variable cost per unit is $40, and fixed costs are $2 million per year. The tax rate is 21%, and the required rate of return on the project is 10%.
1.)Suppose the price, units, VC per unit, and FC projections are accurate within +/- 10%. Calculate the best case NPV. (Round 2 decimals)
2.)Suppose the price, units, VC per unit, and FC projections are accurate within +/- 10%. Calculate the worst-case NPV. (Round 2 decimals)
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan