(Related to Checkpoint 13.3) (Scenario analysis) Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of a child's shoe, which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by

11

percent (either above or below), associated with this new product are shown here:

Unit price: $126 Variable costs: $77 Fixed costs: $251,000 per year Expected sales: 10,200 per year

. Since this is a new product line, you are not confident in your estimates and would like to know how well you will fare if your estimates on the items listed above are

11

percent higher or

11

percent lower than expected. Assume that this new product line will require an initial outlay of

$1.03

million, with no working capital investment, and will last for

10

years, being depreciated down to zero using straight-line depreciation. In addition, the firm's required rate of return or cost of capital is

10.4

percent, and the firm's marginal tax rate is

34

percent. Calculate the project's NPV under the "best-case scenario" (that is, use the high

estimateslong dashunit

price

11

percent above expected, variable costs

11

percent less than expected, fixed costs

11

percent less than expected, and expected sales

11

percent more than expected). Calculate the project's NPV under the "worst-case scenario."

The NPV for the best-case scenario will be

$____?

(Round to the nearest dollar.)