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Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production. You will need an initial $5,500,000 investment in threading
Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production. You will need an initial $5,500,000 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 $1,325,000 and that variable costs should be $250 per ton; accounting will depreciate the initial xed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $}'00,000 aer dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $362 per ton. The engineering department estimates you will need an initial net working capital investment of $530,000. You require a return of 11 percent and face a tax rate of 22 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 NF'V 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 :15 percent; the marketing department's price estimate is accurate only to within :5 percent; and the engineering department's net working capital estimate is accurate only to within :10 percent. What are yourworst- case and bestcase NPVs for this project? [A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to Zdecimal places, e.g., 32.16.] a1. OCF 212. NP'vIr b. Worstcase l'ilP'vr Best-case NPV
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