Question
5 We are evaluating a project that costs $802,000, has a life of eight years, and has no salvage value. Assume that depreciation is straight-line
5 We are evaluating a project that costs $802,000, has a life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 138,000 units per year. Price per unit is $40, variable cost per unit is $29, and fixed costs are $812,426 per year. The tax rate is 22 percent, and we require a return of 19 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 13 percent. a. Calculate the best-case NPV. b. Calculate the worst-case NPV.
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