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Consider a project with a 3-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to
Consider a project with a 3-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project and there is no salvage value. The required return is 13% and the tax rate is 34%.
You've collected the following estimates:
Base case | Pessimistic | Optimistic | |
Unit sales per year (Q) | 4,000 | 2,000 | 6,000 |
Price per unit (P) | 50 | 40 | 60 |
Variable cost per unit (VC) | 20 | 35 | 15 |
Fixed costs per year (FC) | 30,000 | 50,000 | 20,000 |
what is the NPV in EACH case? what is the annual free cash flow in each base?
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