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A project requires an initial investment of $10,000, straight-line depreciable to zero over 4 years. The discount rate is 10%. Your tax bracket is 34%
A project requires an initial investment of $10,000, straight-line | ||||||
depreciable to zero over 4 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. | ||||||
Base | Lower | Upper | ||||
Case | Bound | 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 |
What is the base case NPV for the project?
a | 1523 | |
b | 4974 | |
c | 5247 | |
d | 6529 | |
e | 8281 |
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