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Tom is evaluating a project that costs $ 1 , 0 8 0 , 0 0 0 , has a ten - year life, and

Tom is evaluating a project that costs $1,080,000, has a ten-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 52,000 units per year. Price per unit is $50, variable cost per unit is $30,
and fixed costs are $730,000 per year. The tax rate is 35 percent, and we require a return
of 15 percent on this project. Suppose the projections given for price, quantity, variable
costs, and fixed costs are all accurate to within +-10 percent. Help Tom calculate the best-
case and worst-case NPV figures.
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