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Consider a project to supply Detroit with 2 7 , 0 0 0 tons of machine screws annually for automobile production. You will need an

Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,600,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,350,000 and that variable costs should be $255 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $725,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $368 per ton. The engineering department estimates you will need an initial net working capital investment of $540,000. You require a return of 12 percent and face a tax rate of 23 percent on this project.
a-1. What is the estimated OCF for this project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.,32.)
a- What is the estimated NPV for this project? (Do not round intermediate calculations
2. and round your answer to 2 decimal places, e.g.,32.16.)
b. Suppose you believe that the accounting department's initial cost and salvage value projections are accurate only to within \pm 10 percent; the marketing department's price estimate is accurate only to within \pm 15 percent; and the engineering department's net working capital estimate is accurate only to within \pm 5 percent. What are your worstcase and best-case NPVs for this project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.)
\table[[,,],[a-1.,OCF,],[a-2.,NPV,],[b.,Worst-case NPV,],[,Best-case NPV,]]
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