PT Kolam has a project that costs $ 900,000, has a life span of five years, and has a residual value of $ 130,000. Depreciation is straight-line to zero. 14% required return and 34% tax rate. Sales are projected at 2350 units per year. The price per unit is $ 400. Variable costs per unit are $ 200 and fixed costs $ 150,000 per year. It is known that the depreciation expense is $ 180,000 per year and the engineering department estimates that you will need an initial net working capital investment of $ 50,000.

a) Scenario Analysis

If the projected amount of sales, prices, variable costs and fixed costs provided is accurate at 7%.

1) Determine the upper and lower limits for the projection

2) Determine the NPV of the project base-case scenario

3) Determine the NPV of the project in the best-case and worst-case scenarios