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Consider a project to supply Detroit with 4 0 , 0 0 0 tons of machine screws annually for automobile production. You will need an

Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production. You will need an initial $5,400,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $850,000 and that variable costs should be $440 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $380,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $560 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 marginal 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-2.
What is the estimated NPV for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,1,234,567.89.)
b.
Suppose you believe that the accounting departments initial cost and salvage value projections are accurate only to within \pm 15 percent; the marketing departments price estimate is accurate only to within \pm 10 percent; and the engineering departments net working capital estimate is accurate only to within \pm 5 percent. What is the worst-case NPV for this project? The best-case NPV?(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,1,234,567.89.)
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