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A firm has an opportunity to invest in a project that will have an initial cost of $800,000. The project will last for 8 years,
A firm has an opportunity to invest in a project that will have an initial cost of $800,000. The project will last for 8 years, and depreciation on the project's assets will be on a straight-line basis to zero. The firm's tax rate is 40%, and its required return on this type of project is 10%. The firm has also estimated the unit sales, price per unit, variable costs per unit, and fixed costs associated with the project (as seen in table below). What is the NPV of the project if the lowest unit sales occur, assuming that everything else stay at their base levels? Round your answer to the nearest dollar. Base Level Unit sales 60,000 Price per unit $7 Variable costs $3.50 per unit Fixed costs $20,000 Lower Bound 50,000 $6 $3 $10,000 Upper Bound 70,000 $8 $4 $30,000
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