Question
A new 5-year project has expected sales of 6,000 units, 5 percent; variable costs per unit of $26, 2%; annual fixed costs of $43,000, 2
A new 5-year project has expected sales of 6,000 units, 5 percent; variable costs per unit of $26, 2%; annual fixed costs of $43,000, 2 percent; annual depreciation of $50,000; and a sale price of $46 a unit, 1 percent. The project initially requires $250,000 of fixed assets and $10,000 of net working capital. At the end of the project, the net working capital will be recouped and the fixed assets will produce an aftertax cash inflow of $75,000. The tax rate is 24 percent and the discount rate is 15 percent. What is the net present value of the pessimistic scenario?
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