Question
We are evaluating a project that costs $604,100, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $604,100, 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 90,000 units per year. Price per unit is $44, variable cost per unit is $31, and fixed costs are $710,000 per year. The tax rate is 23 percent, and we require a return of 12 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 15 percent. Calculate the best case and worst case NPV figures.
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