We are evaluating a project that costs $108,493, has a seven-year life, and has no salvage value.
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Question:
We are evaluating a project that costs $108,493, has a seven-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 4,070 units per year. Price per unit is $53, variable cost per unit is $27, and fixed costs are $80,144 per year. The tax rate is 37 percent, and we require a 12 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-11 percent. What is the NPV of the project in worst-case scenario?
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