Question
Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $21.0 million. This fixed asset will be depreciated
Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $21.0 million. This fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is expected to sell one million units each year at a price per unit of $16.50 and a cost per unit of $5.40, however actual cost and price may be 10% higher or lower than these expected values. Fixed costs will be $4 million per year. The tax rate is 21 percent and the required return on the project is 11.4 percent.
What is the projects best case scenario NPV?
$1.36million | ||
$0.52million
| ||
-$1.43million
| ||
$2.04million
| ||
None of these is correct
|
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