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Problem 10-9 Scenario Analysis (LO3) The most likely outcomes for a paricular projectare estimated as follows: Unitprice:Variablecost:Fixedcost:Expectedsales:5,505305428,80041,908unitsperyear However, you recognize that some of these estlmates
Problem 10-9 Scenario Analysis (LO3) The most likely outcomes for a paricular projectare estimated as follows: Unitprice:Variablecost:Fixedcost:Expectedsales:5,505305428,80041,908unitsperyear However, you recognize that some of these estlmates are subject to efror. Suppose each varlable turns out to be elther 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an inlilal investment of $1.2 million, which will be depreciated straight-line over the project life to a finaivalue of zero. The firm's tax rate is 21%, and the required rate of return is 12%. a. What is project's NPV In the best-case scenario, that is, assuming all varlables take on the best possible value? b. What is project's NPV in the worst-case scenarto? Note: For all the requlrements, a negatlve amount should be Indlcated by a minus sign. Enter your answers In dollars, not in millions. Do not round Intermedlate calculatlons. Round your answers to the nearest dollar amount. \begin{tabular}{|l|l|} \hline a. NPV & \\ \hline b. NPV & \\ \hline \end{tabular}
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