Question
Green Gardens is analyzing a proposed 5-year project that requires an investment of $77,000 in fixed assets and $17,400 in net working capital. The company
Green Gardens is analyzing a proposed 5-year project that requires an investment of $77,000 in fixed assets and $17,400 in net working capital. The company uses straight-line depreciation over a project's life. Sales are estimated at 24,000 units +/-3 percent. The expected variable cost per unit is $17, and the expected fixed costs are $39,000. The fixed and variable cost estimates are considered accurate with a range of +/-2 percent. The sales price is estimated at $36 a unit +/-1 percent. The discount rate is 16 percent and the tax rate is 35 percent. What is the net income under the pessimistic case scenario?
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