this is the question so I guess you can't help. Oh well.

1. Walmart is considering investing $3 million in an automatic sewing machine to produce a newly designed line of dresses. The dresses will be priced at $300, and management expects to sell 12,000 per year for six years. There is, however, some uncertainty about production costs associated with the new machine. The production department has estimated operating costs at 70% of revenues, but senior management realizes that this figure could turn out to be as low as 65% or as high as 75%. The new machine will be depreciated at a rate of $300,000 per year for six years (straight line, zero salvage). Walmarts cost of capital is 15% and its marginal tax rate is 30%. Calculate a point estimate along with best and worst case scenarios for the projects NPV.

Cash flow in years 1-5

65%

70%

75%

Revenues

Operating costs

Depreciation

EBT impact

Tax

Eat impact

Add back depreciation

Cash flow

Best		Point Estimate		Worst