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We are evaluating a project that costs $1,220,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $1,220,000, has a five-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 88,900 units per year. Price per unit is $35.20, variable cost per unit is $21.45, and fixed costs are $769,000 per year. The tax rate is 30 percent, and we require a return of 10 percent on this project.
Base-case cash flow:
NPV:
NPV Drop:
Sensitivity of NPV:
Increase in OCF:
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