Question
We are evaluating a project that costs $1,800,000, has a life of 6 years, and has no salvage value. Assume that depreciation is straight-line to
We are evaluating a project that costs $1,800,000, has a life of 6 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 87,300 units per year. Price per unit is $38.19, variable cost per unit is $23.40, and fixed costs are $827,000 per year. The tax rate is 24 percent, and we require a return of 9 percent on this project. Suppose the projections are given for price, quantity, variable costs, and fixed costs are all accurate to within 10 percent. Calculate the best-case and worst-case NPV figures.
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