Question
We are evaluating a project that costs $732,000, 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 $732,000, 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 39,000 units per year. Price per unit is $60, variable cost per unit is $30, and fixed costs are $640,000 per year. The tax rate is 22 percent and we require a return of 16 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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