Question
Latrobe Electric Auto Corp. is considering launching a new 1-seat electric vehicle. The equipment will cost $780,000, have a four-year life, and no salvage value.
Latrobe Electric Auto Corp. is considering launching a new 1-seat electric vehicle. The equipment will cost $780,000, have a four-year life, and no salvage value. Depreciation on this equipment is by the straight-line method to zero. Sales are projected to be 170 vehicles per year when sold at a price of $16,300. There are per unit costs of $11,100 for every vehicle produced. There are additional fixed costs, incurred on a yearly basis of $535,000 per year. The required return for this product line is 115 and the corporate tax rate is 21%.
calculate the base cash flow and NPV.
using the information, based on your experience, you believe the estimates for unit sales, variable costs, and fixed costs are accurate to within 10%. The cost for the equipment is an actual, quoted price and not an estimate. What are the best case and worst case NPV forecasts?
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