Question
The Prince are evaluating a project that costs $900,000, has a 10-year life, and has no salvage value. Assume that depreciation is straight-line to zero
The Prince are evaluating a project that costs $900,000, has a 10-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 160,000 units per year. Price per unit is $32, variable cost per unit is $10, and fixed costs are $650,320 per year. The tax rate is 25 percent, and the company requires a 12 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 12 percent. Calculate:
i.the worst-case NPV
ii.the best-case NPV
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