.1.) A project requires an initial investment of $10,000, straight-line depreciable to zero over

four years. The discount rate is 10%. Your tax bracket is 34% and you receive a tax credit for

negative earnings in the year in which the loss occurs. Additional information for variables

with forecast error are shown below.

a) What is the best case NPV for the project?

A. $5,247

B. $26,462

C. $29,306

D. $32,327

E. $34,252

b) What is the worst case NPV for the project?

A. -$11,594

B. -$10,967

C. -$4,423

D. -$2,327

E. +$3,677

c)

What is the base case NPV for the project?

A. $1,523

B. $4,974

C. $5,247

D. $6,529

E. $8,281

d)

Suppose you want to conduct a sensitivity analysis for the possible changes in unit sales.

What is the IRR when the sales level equals 3,250 units?

A. 32.6%

B. 42.8%

C. 57.9%

D. 118.6%

E. 121.5%

	Base Case	Lower Bound	Upper Bound
Unit Sales	3,000	2,750	3,250
Price/unit	$14	$13	$16
Variable cost/unit	$9	$8	$10
Fixed costs	$9,000	$8,500	$10,000